Key Takeaways:
Over the last couple of years, more homeowners have taken on the kitchen remodel or master bathroom upgrade they've been putting off leading to an increase in home improvements. Whether you're working on your fixer-upper or looking to make your home more appealing to buyers on the market, home renovations can help you make your vision a reality.
Turn “one day” into “today” with a home improvement loan for financing any home remodeling project, large or small. Learn how to get money to renovate your home through a home improvement loan.
Before you apply for a home improvement loan, consider whether you can afford a renovation with your current budget. Some homeowners pay for remodels with cash, but this may not be an option for everyone. Paying with cash can require some patience, as the average cost of a home remodel in the United States in 2020 was around $35,000.
When deciding whether you should get a home improvement loan, ask yourself these questions to make sure you're not moving out of your financial depth:
If you have the funds saved up for a minor renovation in the ballpark of a couple thousand dollars, it might be simpler to handle a one-time upgrade. However, even projects you pay for in cash can take months to pay off. A smaller monthly payment might be easier to handle. Before you decide the best way to finance a kitchen remodel or whether to take out a home improvement loan for pool installation, map out your payment schedule to see what your spending plan would involve.
Your emergency fund is a safety net in case of a catastrophe like major injury or a loss of employment. Pulling from this reserve is generally not a good idea when completing a home remodel. It's safer to have several months of your income put away for emergencies before you spend thousands on a renovation project.
A 2019 survey found that over 51% of American households had debt in installment loans, while 45% had credit card debt. If you have these or other high-interest loans hanging over you, you won't want to add another monthly payment to the list. If you have the cash, it might be better to use it to pay off your debts before spending it on a renovation.
If you ask yourself these questions and decide on a home improvement loan as the best option, you can feel comfortable pressing “go” on your home renovation project.
The optimal time to renovate depends on how long you plan to stay in your home. Determine if your remodel will help you break even or gain a higher return on your investment in your home.
If you're going to contribute tens of thousands of dollars to your home renovation project but still keep at least 20% equity in your home, you could get an excellent return reasonably quickly if you resell soon.
If you want to spend up to 80% of your equity on a remodel, think hard about renovations, especially if you're selling. The extensive upgrades you add might appeal only to buyers with your tastes, leaving others to look for a more affordable home they can overhaul themselves. However, if you plan to be in your home for a long time, fixing that plumbing problem in the guest bathroom might be more important.
When deciding how to pay for home renovation projects, you might consider the loan's cost and what design features you want to add. However, preparing for a renovation involves taking several other steps that can help you make wise decisions about the best way to pay for your home remodel.
Consider these guidelines before obtaining basement finishing financing, a bathroom remodel loan or any other home addition loans:
Determining your home's current market value helps you see the bigger picture before setting out on a renovation project. If you're looking to sell after you renovate, have an appraiser complete a home inspection to determine its value and find potential issues before you begin renovating. For example, serious foundation issues might take priority over a master bedroom redesign.
Whether or not you plan on selling, it's always a good idea to remodel for added value. Research which renovations are most likely to bring you a better return on investment. Check online listings or consult your real estate agent to get the most bang for your buck. Some of the best renovations for increasing your home's value include:
Deciding how much money you actually need to complete your renovation is an essential step in applying for a home improvement loan. Once you've been approved, you certainly want to stick to your budget.
Start narrowing down a budget by determining your home's value and which renovations would likely increase its market price. Once you know your renovation goals — whether to increase your home's value, improve structural and safety issues or make the space more enjoyable for your family — you can decide on a budget that fits your needs.
As fewer homeowners work with general contractors on their remodels, more people complete home renovation projects by themselves. Going the DIY route can save you hundreds of dollars on projects, but it's costly to fix a botched DIY job — especially structural, electrical or plumbing work.
Choosing to DIY your renovation might be your best move if:
Working with a professional involves labor costs that could make your remodel significantly more expensive. If you decide to hire a professional contractor, ask around for several project timelines and cost estimates. A professional might save you money if:
A home improvement loan might be the best way to finance home addition renovations. Whether you're planning to put your house back on the market or create your forever home, a home improvement loan can help you get every room and project done. Here are a few jobs a home improvement loan can help you accomplish all at once:
At Midland States Bank, we're here to help you reach your home goals with our loans and mortgage refinancing options. Our quick loan application process gives you the money you need in no time.
Visit our home improvement page to see frequently asked questions about home improvement loans. If you want to get started right away, connect with us through our online form to get your renovation rolling. Or, if you prefer to speak directly to one of our team members, schedule an appointment with a banker today.
