One of the questions that we get all the time is, what type of loan is best for home remodels or renovations or home improvements?
We stumbled upon these interesting facts from Zillow comparing or asking potential home buyers what would they rather do. Would they rather renovate their existing home and make it just the way they like it and stay put, or would they rather buy a new home? I was actually shocked to see that 76% of everybody who answered that survey said they’d rather renovate and make their existing home just the way they want it as compared to buying a new home and moving. Of retirees, get this, 91% said that they would rather remodel their existing home rather than have to go through the hassle of moving.
So that brings us to today’s topic, which is our existing home construction loan, also known as a remodel loan. This loan product, why it’s so beautiful and why I believe it’s vastly superior to a home equity line of credit is that it’s a fixed rate mortgage which will allow you to make sure that rate doesn’t go variable in the future, and it also enables you to borrow against the future value of the home.
Now what does that mean? Well, you’re going to meet with an architect or a general contractor, and they’re going to give you a set of plans and a construction contract showing you what’s going to be done to the home and what the cost is. We’re going to go ahead and take those plans and that cost breakdown, supply it to an appraiser, and the appraiser is going to say after your home is done, when the renovation is complete, here’s the future value of your home, it’s what it’s going to be worth. We’ll actually lend off that future value.
Now if you compare that to a home equity line, a home equity line will allow you to only borrow off the current value of your home. With the renovation/remodel existing home construction loan, you’ll be able to borrow more because we’re borrowing off the future value of the home, you’ll be able to do it with a fixed rate loan, and you’ll be able to do one loan, where in the example of a home equity line, you might have a first mortgage and a home equity line.
Hey, if you’d like some more information about the Existing Home Construction Loan Program, we’d be honored to answer your questions and run some analysis for you. Feel free to message us or give us a call. We’re here, and we’d absolutely love to hear from you.