If you’ve got a home renovation project in mind, then you are probably thinking of ways that you can afford it. If it is a major project that has the potential to improve the value of your home, then a home renovation loan may be right for you. Continue reading to learn more about considerations that you should think about before taking out a home renovation loan. 

Is the project worth taking out a loan for? 

If you’re only looking to make small improvements or repairs to your home, then a home loan may not be necessary or the best option. For these kinds of projects, it may be a good idea to save your money and pay for them in cash, rather than taking on additional debt. 

However, you don’t want to rack up an expensive credit card bill with high interest to complete renovations, which is where home renovation loans come in.  We offer server types of home renovation loans, such as Homestyle Renovation and 203K Renovation loans.  You obtain more information here.  We are experts and work with many top home renovation contractors. 

Is the renovation worth the investment? 

If you’ve decided that you want to complete a larger renovation project, such as a major kitchen or bathroom remodel, then a home renovation loan will probably be necessary. Of course, the most important consideration when you’re thinking about a renovation is whether it will be a worthwhile investment. For most, the primary goal of a renovation is to increase the value of the home. 

Are you qualified for the loan, and what are its terms? 

The first step in getting a loan is to determine what you are qualified for. You will need a good credit score and good credit history to qualify for a good loan. You will also want to be aware of all the terms involving the interest rate and repayment time to determine whether the benefits of the renovation will outweigh the cost of the loan. 

The most common type of loan for home improvement projects is a home equity loan. Equity is the difference between your home’s value and the balance that you have left to pay on your mortgage. A home equity loan is taken out against the value of the equity that you have in your home. Because this type of loan provides significant collateral, the interest rates can be very competitive.   The draw back is the value is derived from your homes current state of repair and is limited to 80% of that value.  Home renovation loans are based upon the after completed value of your home and can go as high as 110% of the after repaired or remodeled value.

How Much Money Should You Invest Into The Loan? 

Taking out a large loan may seem desirable as you don’t have to wonder whether it will cover the costs of the renovation. However, investing more money than you need into a home renovation can be dangerous. 

First, taking out more than you need can also mean that you are taking out more than you can payback. Additionally, you should keep track of how much equity you have invested in your home, versus what you owe in your mortgage and home equity loans. The less money you have invested into your home, the higher the likelihood that you will default on your loan.  If you default on your loan, this will ruin your credit score, and of course, prevent the renovation project from being worthwhile.

Examples of Projects That May Require Home Renovation Loans

The following are examples of projects that are considered major renovations and would likely require a loan to complete. However, these projects also have significant benefits that will improve the home and its value. 

1. Metal Lap Siding 

Metal Lap Siding can be expensive, and replacing a home’s side is considered a major renovation. However, this type of project can increase the overall value of your home. This type of siding is fire and weather-resistant, durable, and requires little maintenance. Additionally, metal lap siding comes in a variety of colors and styles and can improve the curb appeal of your home. 

All of these things will cause this home renovation project to increase the overall value of your home, especially if you live in an area with extreme weather conditions or high fire risk. 

2. Pool Deck Drain Replacement

If your home has a pool, this is a feature that already increases the value of your home, especially if you live in an area with a warm climate. However, for this to be an asset to your home rather than a burden, it is important to maintain it well. 

If your pool deck drainage is old, outdated, or improperly installed, it may cause any of the following problems: 

• Standing rain and splash water can lead to the growth of mold and algae on the pool deck, leaving unsightly stains and making the deck slippery. 
• It can cause dirty water and debris to enter the pool

While replacing and/or redesigning the drainage system for your pool is a major project, it can have a huge payoff for your home to have a well-functioning pool and deck that is easy to clean and maintain. 

3. Vinyl Sliding Doors 

Installing sliding glass doors in your home can improve the interior of your home, as well as the views from your home. Sliding doors allow an increase in natural light in your home and better views of your backyard. 

Vinyl patio doors can be especially beneficial to your home for several reasons. First, they are a cost-effective option when choosing the best material for your sliding glass doors. Also, they are energy-efficient, so if you’re installing sliding doors for the first time, you don’t have to worry about an increase in your energy bill. And if you’re replacing outdated sliding glass doors with vinyl sliding doors, you may even save some money each month. 

Vinyl can also withstand weather elements without easily breaking down or showing wear and tear. 

Know All of Your Home Renovation Loan Options

If you take your time and consider many factors when taking out a home renovation loan, it can be a very wise choice. Home renovations can increase the value of your home, help you save money on energy bills, and simply make living in your home more enjoyable for you and your family. If you’ve got a major renovation project in mind, then keeping the above consideration in mind when applying for a home renovation loan will allow your renovation to pay off. 

Brian Jeffries is the content director for the Innovative Building Materials blog and a content writer for the building materials industry. He is focused on helping fellow homeowners, contractors, and architects discover materials and methods of construction that save money, improve energy efficiency, and increase property value.