Even for those individuals who are well-versed in flipping houses for profit, researching the right type of loan still requires a lot of time, focus, and concentration.
In an effort to assist you in making a shrewd and ultimately profitable, business decision, continue reading to learn about the different types of loans you can get for home renovations.
The FHA 203(k) Rehab Loan
The FHA (Federal Housing Association) supports the first loan on the list and is specifically designed for people who want to buy a property and then renovate it.
The FHA 203k loan is unique in that it essentially covers both purposes at the same time and is simultaneously a home improvement loan and a mortgage and is heavily based on your credit history and current outgoings and assets.
There are two forms of FHA 203k loans, with the first being a limited type of loan for financing projects up to the sum of $35,000, and the second being a standard loan for financing projects over that amount.
Refinancing (Cash Out)
Cash-out refinancing is a simple and incredibly popular way of freeing up the money that you’ve been investing into your property for so many years and is basically a remortgage of your home.
To be approved for a refinancing loan, you must firstly apply for a second mortgage on your house or apartment, and if you qualify, you’ll be able to pay off the older loan against your home with the new, more generous updated one.
Personal loans are perhaps the most common way that homeowners can afford to either renovate their current house, or else flip a newly bought property for profit, with the usual terms ranging between two and eight years.
When considering taking out a personal loan, it’s definitely always best to contact reputable and renowned private hard money lenders who will ensure that you’re taking out the best form of loan to suit your personal circumstances.
Home Equity Loan
Home equity loans are invariably received as one lump sum and are funded by the existing equity of the home that you currently live in.
Most home equity loans have a fixed interest rate, meaning that you won’t be stung for extortionate extra fees in the future and are usually repayable over five to thirty-five years. As a general rule, lenders of home equity loans will usually allow you to borrow up to eighty-five percent of the value of your property.
Finally, HELOCs (Home Equity Line of Credit Loans) are an alternative way of accessing a little or a large amount of your property’s equity, with interest rates on some HELOC loans being fixed and others variable.
Within the draw period, as determined by the contract that you and the lender both sign, you’ll be able to withdraw money steadily as your renovation project moves forward, although you should be aware that the potential fees attached to HELOC loans vary considerably from lender to lender.