HomeSmart Key Realty
Cynthia Vanover, HomeSmart Key RealtyPhone: (760) 265-5707
Email: [email protected]

Exploring how to finance a home addition

by Cynthia Vanover 06/22/2022

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
Author

Cynthia Vanover

I spent over 2 decades as a senior loan officer and mortgage supervisor for one of the largest residential lenders in the area, and I also have 15 years of successful experience as a realtor. This experience, combined with my intricate knowledge of the lending process, gives me (my clients) a significant advantage when negotiating, writing creative offers and and allows me to guide my sellers to the right offer, not just the highest offer, which can be laden with issues and delays.  

When you hire me, my team of experts in marketing, home photography, inspection, escrow, lending, and brokerage will work together toward the success of your home sale or purchase. Their expertise frees me up to focus my attention on my clients questions, concerns, negotiate, and solve problems, and give my clients the personal care they deserve. This collaboration with the best of the best has resulted in my being a consistent top producer for many years. I hope to have the opportunity to put my team to work for you!