If you are considering home renovations in a property you currently own, then you have likely drawn up a wish list of projects you want to get done. The next logical step was determining the price of each upgrade and then tallying up the entire cost. That final number probably made you jolt a little, as it is probably a four digit number, and possibly even five or six! You probably do not have that kind of cash laying around, so you are considering financing the work. Keep reading to learn 3 situations where a home renovation loan can make financial sense.
1) Are you trying to flip or sell a home? If you are looking at home renovations with the intention of putting the home on the market, then getting financing to cover the costs of home renovations can sometimes pay huge dividends. Upgrading an older home to modern amenities, or giving it things that rise it above standard homes in the community can mean you sell it at a higher price point. Expanded or open concept kitchens, swimming pools in the backyard, finished basements, and extra bedrooms and bathrooms are all features that buyers love. They might cost fifty grand to add, but if they add a hundred grand or more to the property value, the profit margin pays back the home renovation loan and you as well.
2) Are you living in your home longer than you thought you might? Some couples get a starter or mid-range home where they have and raise kids, with the intention of moving to a better or retirement home in their later years. They later discover they like where they are and have grown roots. Sometimes they find extra money in their monthly budget, as their mortgage interest rate drops or they pay it off early. If you already have a set number of dollars going each month to financing on your house, why not treat yourself to a round of upgrades that keeps you in your current home happier and longer? You can already handle the payment, and it spares you from the hassle that is buying, selling, and moving.
3) Are you looking to generate income from your home? If you have a large home with extra space, unused areas, or unfinished areas, you might have the chance of creating a monthly paycheck from it. This is easier to do after the kids have moved out. Partitioning off part of the home as a standalone apartment means you can rent out to someone, and unfinished basements, above-garage spaces, and sometimes even mother-in-law suites can all be converted into such a space. If the monthly rent you collect is less than what you would pay each month for the home renovation loan, you are turning a profit immediately, and it will be pure profit after the loan is paid off.
Now that you know the 3 circumstances where a home renovation loan makes financial sense, you can shop around for one and use while not hurting your overall money picture in the long run. In many cases, you are actually benefiting dramatically!