Making changes to your home decoration or a new home renovation may require a sizeable investment. It is best to make sure that you know the exact amount of the financial burden before you start planning and executing a home remodel. There are also several options available that can help when it comes to financing a home renovation. These steps will guide you through the process of financing.
Calculate the equity on your home
You should start by calculating how much equity you have in your house. This should let you know if you have enough to finance the cost of the renovation. Adding together the balances of current mortgages and subtracting this from the value of the house will give you an idea of the equity you have on the house. You can find a tax assessed value of your house on county auditor websites in your area.
Calculate the amount of money you will need to borrow
You need to figure out how much money you need to borrow and then calculate the loan to value. This can be done by adding the new amount loaned to any outstanding loans and mortgages you have on your house and then dividing the sum by your property value. This will give you your new loan to value ratio after you get the loan. This ratio is important as it will determine the interest rate you are charged.
Find the best lender to borrow from
Contact different lenders in the area and inquire about their rates and terms. It may be good to start your research with a lender you already borrow from as they may be inclined you offer you better rates or waive certain fees. The values you calculated in the previous steps should help you talk to the lenders and figure out the terms and rates.
Understand all the terms
After choosing a lender, discuss all options of equity you have available to you. Have your accountant or a friend with expertise explain the terms to you properly and make sure you understand all the terms fully. Inform your contractor about the time table of financing so they are ready to work as soon as you are ready with the financing.
These tips should help you understand the process of obtaining financing for your home renovation. It is important that you do not overextend yourself. A home renovation is a great investment into a house and will help its value rise.