5 Ways to Get Money for Home Renovations

One of the biggest challenges in owning a home or rental property is the need to pay for repairs. Depending on the condition of your property, the cost may be minor, or if maintenance is long overdue, your costs could be in the thousands to repair and renovate the property.

In this article, we’ll give you some easy tips to get the money you need to flip your house and either keep it or resell it for a profit.

1. Drawing on Savings for Renovations

Savings is the most traditional and challenging way to fund the improvement of your property.

If you’ve been saving for years in anticipation of the big renovation, then you’ll be set; however, most of us won’t have the money saved specifically for this purpose and it may set back other goals that you have planned.

2. Home Equity Line of Credit (HELOC)

Another very popular option is the home equity line of credit or HELOC. In short, the HELOC works something like a secured credit card that allows you to borrow against the equity in your home – the difference between what it’s worth and what you still have left to pay on it.

Home equity lines are generally less expensive than other forms of borrowed capital and carry reasonable interest rates. This is low risk for lenders as their capital is protected by your equity in the event that you fail to make payments.

3. Refinance Your Way to Home Renovations

Instead of a HELOC, you can also opt for a full refinance. This will get you the best interest rate and allow you to get cashback for repairs and renovations after the closing of the refinance.

Depending on the loan program, you may need to pay closing costs; however, the savings on interest will make it more than worthwhile in the long run.

In addition to getting the cash you need, this will also help get you out of an adjustable or high-rate mortgage and lock in a low fixed-rate mortgage.

4. Private and Hard Money Lenders

If your plan is to sell the property for big profit, you may want to consider speaking to private and hard money lenders.

These loans require no credit check (in most cases) and the loan is secured against the property.

Private lenders will loan you the money for a fixed period – usually four months to a year – to quickly fix up the property and put it on the market.

At the end of the term of the loan, you’ll need to sell the property, pay back the loan in full or refinance.

Private money typically carries with it high interest rates, often as much as 16%, due to the increased risk these lenders take.

5. Real Estate Investors

There’s yet another option that isn’t so common:

You can partner with a local investor to fund your fix up and share the profits once the property is sold.

If you’re not in the position to take out a loan, but know that your property has tons of potential, there may be a local investor that will provide the funds as part of a joint venture.

The investor will pay for all the repairs and help you sell the property. At closing, you’ll split the proceeds and never pay a cent on interest.

Picking the Best Path to Home Renovations

There you go: 5 straightforward paths to getting the money you need to make your property a pearl.

Choose the option that fits with your goals and financial situation: one of these is likely to work for you.

Just because your house will be super-marketable after the renovations, doesn’t mean you have to sell it. You can keep it and enjoy the modern finishes as long as you like: it’s your flip!

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How to Finance Your Renovation?

Does your house or rental property need a fresh new look, upgrades, or overdue maintenance? How can you improve the value of your property without breaking the bank?

There is a lot of money available in the current market to help with fixing up your property. In this article, I’ll talk about some of the best strategies to get financed without having to spend too much cash out-of-pocket.

In the investment business, we call financing ‘leverage,’ and the best kind of financing lets us get the most income potential, for the least amount of upfront capital, hence the leverage analogy. Essentially, you make a higher return on investment when you use financing instead of cash.

How can you make this work for you?

Read on to hear more about reliable strategies to get the financial leverage needed to improve condition, value, and make yourself and your tenants more comfortable and satisfied with living conditions.

Finance Your Renovation with a Cash-Out Refinance

Got equity? Pull it out!

If you’ve got some equity in your property, then you have the capital to make the needed interior and exterior improvements to achieve your investment and homeownership objectives. There are several financing approaches available to harness this latent capital that is present in your property. You’re not limited to using your equity just for renovations; you can also start or grow another business, or put a down payment towards a new home or rental.

The most common approach, especially if you’re locked into a high-interest or adjustable-rate mortgage, is to apply for a cash-out refinance. There are numerous government backed programs including Fannie Mae and FHA that offer low-rate refinance programs that make it easier to obtain the capital you need. High LTV or loan-to-value ratio refinance options make it possible to get cash even if you have relatively little equity. It might be just what you need to push your portfolio further.

Home Equity Line of Credit

Another viable option is the Home Equity Line of Credit (HELOC). These second position or junior loans are secured against the equity in your property and allow you to treat the equity in your home as a secured credit card. A HELOC typically has two periods: the draw period, during which there are interest only payments, and the repayment period when principle payments start. Most HELOCs are adjustable rate mortgages and carry with them the risk of payment increases when interest rates rise. Although you can get the capital you need, this type of loan product typically offers less economic protection and security to borrowers.

FHA 203k Purchase or Refinance

A low-cost and big-benefit option is the FHA 203k rehab loan. This FHA program is available for purchase or refinance and lets borrowers finance the cost of rehab directly into the loan. These loans offer excellent rates and terms and let you finance up to 97.75% with a combined loan-to-value ratio of 100%. These loans are intended for owner occupants, however, if you own a multifamily property up to 4 units and live in one unit, you can qualify for the program. You can also use the 203k to finance condos, PUDs, modular homes, and HUD homes. If you combine this strategy with the capital gains tax exemption when selling after two years, you can make a very nice margin.

If you need some help figuring out what strategy will give you the most leverage to finance your renovation or other opportunity, please call us at (617) 250-7100 or click here.

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