If you’ve always had an image of the perfect house, but you know you’ll have do some remodeling on your current one, you may consider a home improvement loan. These types of loans allow you to put home repairs and a mortgage in one payment plan, but is a good idea? Here are the advantages of using a home improvement loan to fix up your home.
Increases Your Home's Equity
It’s common to move into a house that needs some repairs. Some people dream of remodeling a fixer-upper that will increase the home's equity. When you get a 203k loan, the amount you can borrow is based on the equity in your home once the remodel is completed. Keep in mind that a 203k loan is used for recently purchased homes only because it also covers the mortgage of a house.
Minimal Out-of-Pocket Expenses
If you’ve found the perfect place but the flooring is destroyed, you may have to dip into your savings to cover the cost. However, you can choose to take out a home improvement loan and fix amenities or make improvements around your house before you even move in. Better yet, most expenses are covered by the loan—including labor costs for contracts and more. Which means you can keep your savings for something down the line.
Add Your Style to the Home
It can be hard to find a house that’s perfect for your needs. If it’s in a great area, but only has stairs and you or a family member has disabilities, you can get a 203k loan to add in wheelchair ramps or other improvements to make living easier. There are many different types of improvements you can make including flooring, painting, remodeling the bathroom or kitchen, and much more.
Remodeling is Done Quickly
When you get an FHA 203k loan, you’ll have an FHA representative to approve your contractor and the work that needs to be completed. A contractor experienced with FHA lending knows how quickly they need to get the work done based on the terms of your loan. You’re less likely to run into underbidding and long work times when you use FHA approved contractors—overall, this makes your remodel move much faster.
No Need for a Second Lien
If you purchase a home and decide at a later date that you want to make repairs, you may find you need to take a home equity loan. Home equity loans require you to take out a second lien against your home, but since a home improvement loan contains your mortgage and all repairs only one lien is necessary.
