Expanding your home to add value and square footage can be costly, so it’s important to know how to finance a home addition. Just like with buying a home, there are many loan options available to homeowners to fund their projects.
Here is a quick guide to the most common options for financing an addition to your home:
Home equity line of credit
A home equity line of credit allows you to utilize the equity you’ve already built in your home. Equity is equal to the value of your home minus the amount you still owe on your mortgage.
A home equity line of credit typically has a draw period in which you can tap into funds while only paying interest payments. After the draw period ends, you enter a repayment period and start paying back the principal amount.
Government sponsored loans
Title I loans offered by the Department of Housing and Urban Development are available to help fund renovation projects. Requirements for qualifying vary from one state to another, but are meant to fund improvements to basic utility and livability of your home.
Therefore, if your remodeling project is purely aesthetic, you may want to consider a different type of financing.
Personal home improvement loan
A personal loan isn’t tied to the value of your home, but dependent on your individual financial situation. Credit history and debt to income ratio are the main factors lenders will consider when approving you for a personal loan.
This type of home improvement loan offers flexibility for those who don’t want to use their house as collateral. They can also be a good option for homeowners who haven’t had time to build equity in their property yet.
These are only a few options for financing your home remodeling project. Some other possibilities include home equity loans, cash out refinance programs and low-interest rate credit cards for smaller projects. As long as you compare your options carefully, you’ll find the best way to fund your remodeling goals.
About the Author
Rudden|Bobruska Team
Gary Rudden, Lisa Rudden, and Nick Bobruska
RUDDEN BOBRUSKA TEAM
What sets your team apart from other real estate teams?
There is no team out in the market that offers what we do. All of us are Realtors, but
we each have specialized roles, which make our team so unique!
After decades of living and selling real estate in the DMV, we have established
ourselves as one of the top real estate teams with our market expertise and
cutting-edge technology. Our savvy high-tech marketing is on every website
and social media source. We have a huge network with other top agents, which
helps to premarket homes and discover homes for buyers before they reach the
open market. Our services include professional in-house staging services, broker
expertise in negotiating and navigating contracts, and buyer representation in all
price ranges. Each client has different needs and we create a marketing plan based
on those needs.
Our most distinct feature is our in-house construction and renovation team. We
are literally a full-service, one-stop shop when selling or buying a home!
How does the in-house construction and renovation team work?
All work is managed and completed through our licensed and bonded construction
crew. No need to call outside contractors. We are like “HGTV,” but we just don’t
have a show! Whether it’s a small makeover or a major renovation, we do it all. Our
sellers love this aspect of our team because we make preparing your home for the
market so seamless. Our buyers love the advice and insight we can give for future
renovations and repairs.
Having a licensed Maryland Home Improvement contractor as part of our team
along with the knowledge, experience, commitment and services that we offer, truly
puts our team as a vanguard in the real estate industry.