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Financing the Renovations on Your Home

Home Renovation and Financing

So you have the urge or need to renovate your home? Maybe a new baby has come along and you need more bedrooms or maybe the kitchen is too small and you want to expand the size of the home. Whatever your intentions, you may not have the available funds in your savings account and you may require some household finance.

Depending on the size of your renovation project, the home finance lender will want to be assured of several things:

• You have acquired the necessary building permits. If the home finance is a substantial dollar amount, the lender will not want to loan any money without knowing that the city or township has approved the prospective construction.
• You must have adequate house insurance in place. The home finance lender may ask to review your insurance policy to determine whether the amount and type of insurance will cover the expansion.
• You may be required to show blueprints of the expansion to assure the home finance lender that the expansion is viable. Home finance specialists need to protect their monies or the investment of their lenders so knowing the renovation will be carried out properly is important to everyone.
• You will need to show proof of income and most likely the same type of household finance information as when you applied for your mortgage. The home finance lender will want to see that your financial situation has improved or at the very least has not deteriorated and you are still able to carry the home loan.
• You may be asked whether a qualified building contractor is completing the renovation or yourself. The lender may wish to see the contractor’s credentials. And, if it is yourself and maybe your buddies, the home finance lender may inquire as to your abilities to complete the job. Again, the utmost concern is the protection of their companies’ or investors’ funds.
• You will need to speak about a time-line, both in terms of the actual expansion work and of course in terms of the home finance. How long will the renovation take to complete? For what period of time do your require a home loan? Some home finance lenders will adjust your existing mortgage but some may require you to pay the home finance in a certain amount of time.
• You may be required to have a home appraisal or assessment of the home to determine whether the value warrants the renovations. For example, if the renovations are considered “too rich” in nature, then the home finance lender may not allow the home loan to be processed because when the home is sold, the value cannot be recouped. Adding marble floors and gold faucets may not be suitable in a neighborhood of homes selling for $80,000.

Sometimes, depending on the size of the renovation and your credit worthiness, it may be just as simple to use your credit card or line of credit for your home finance. It may not be as prudent in terms of saving money on the interest but it would be a simpler and faster process in that you are not required to jump through the hoops to obtain your household finance.

Review all your options and know what is available. Informed decisions are always better in the long run as opposed to quick, unintelligent decisions that may lead to heart break when your renovations are still in progress ten years from now. If you need to home finance the project, then you need to see progress and know that there is a positive outcome to the project at hand and you need to know your home loan was worth the costs.

In summary, be prepared before you approach the bank or a private home loan broker. Knowing what is expected of you and having all your documentation in order will provide you with a better chance of securing that home loan.

Please remember that the above-discussed points are general guidelines. They are not to be construed as definitive requirements set out by home finance lenders. Each lender has different requirements and you are best served by speaking directly with your home loan expert.
 


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