If you recently purchased a home that needs a lot of work and now you want to complete some remodeling projects to make the house nicer, you may need to get a loan to do the work. Remodeling a house can be costly, and most people do not have a lot of cash sitting around for projects like this. If you do not have a lot of equity in the house right now, you might think you would not qualify for a loan, but that may not be the case. Here are a few things to know if you are in this situation:
Equity Loans Are Based on the Current Equity
The first thing to understand is that there are different types of loans you can get to complete home remodeling tasks, and the first type is a traditional home equity loan. A traditional home equity loan offers a way to borrow money against your house, but you must have a decent amount of equity in the house in order to qualify.
Your lender may appraise the house to find out its current worth before approving a loan. From there, you can borrow up to 80% of the home's value. If you owe 80% of the home's value, you would not be able to get this type of home equity loan; however, there are other options.
You Could Look for a Lender that Offers Post-Remodel Appraisals
One of the other types of equity loans you could investigate is one that offers the loan amount based on the post-remodel appraisal. With this type, the lender would appraise the house based on all the remodeling efforts you put into it. The lender would want to know how much the house would be worth after you complete all of your planned remodeling projects. From there, you could borrow up to 80% of the home's value – post-remodel value.
For a lender to determine the post-remodel value, they would have to compare your house to other homes in your town or city. They would then look at the work you are planning on doing and would base the appraisal amount on all of that. This is a better option if you currently do not have a lot of equity in your house, and this option would offer a way to get the cash you need to perform major renovations on your house.
If you are interested in remodeling your home and will need a loan to do it, contact a lender that specializes in home remodeling loans.
Share21 June 2018
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