Home Equity Loans and Renovation Line of Credit
If you’re planning renovations that will significantly improve your home, a home equity loan may be a good fit. These loans typically offer competitive interest rates compared to personal loan options and allow you to borrow against your home’s future value. They also have predictable repayment terms.
What is the difference between home equity loan and home line of credit?
Investing in renovation line of credit that will enhance the resale value of your home is a great way to boost your long-term return on investment. However, renovation projects can be expensive and sometimes it’s hard to balance your immediate needs with your long-term goals.
A renovation line of credit is an excellent option for borrowers with an eye on the future, as it allows you to borrow up to 96% of your home’s projected after-renovation value. This is higher than the 80% loan-to-value (LTV) that is typically offered by private lenders. Plus, it’s a single-close product that requires less documentation and closing costs.
Personal loan options and credit cards are a good option for small-scale home improvement projects, like adding a fresh coat of paint or installing new kitchen appliances. However, credit card interest rates are high and are often unaffordable for long-term funding. Instead, it’s best to do your homework and explore government and other financing programs before taking on debt for a large renovation project. For example, the Department of Housing and Urban Development offers Title I loans to finance repairs and improvements on properties that are in a distressed condition. These are available to low- and middle-income homeowners.