How To Finance Home Renovations

Have you decided to start a home renovation? How are you going to finance that? Are you going to finance on your own or do you want to apply for a home improvement loan? Depending on your own situation and the size of the necessary renovation, you can find different possible funding options. United Field Services, Inc. wants to present some of the most common ones for your attention.

Refinance your home loan

Another option to start a renovation without taking an additional loan is reviewing your current home loan and checking whether refinancing the mortgage will suit your needs. In other words, you can leverage the equity of your home and involve additional resources for home improvement. This will be calculated by comparing the value of the assets you own and the amount of your current mortgage.

An important thing to consider is that there might be some hidden fees, including the ones for appraisal, taxes, fees for origination, or other related costs. Additionally, if you are interested in taking a long-term loan, the life of your loan will be extended and you will need to pay off for a longer period. However, this option might be beneficial if you can negotiate a lower interest rate compared to your initial one.

Take out a personal loan

If you do not want to connect your renovation loan with the home value, taking a personal loan might be the best option, especially for small-scaled renovations as they are typically provided up to around $50,000 and are offered in the secured or unsecured forms. This type of loan is more convenient, as it mostly has lower interest rates and if you choose an unsecured loan, you will not be required to provide collateral. The interest rate will mostly depend on the agreed terms, the specific product, and the credit history you have up to now. 

Home equity line of credit (HELOC)

The home equity line of credits (HELOC) is very common for financing home improvements. HELOC is a secured loan, which is not provided as a lump sum, instead, you can withdraw necessary funds from the line of credit several times. The latter means that you will have to pay the interest-only for the portion of the HELOC that you have already used. Based on the fact that your home is provided as collateral for the loan, the interest rates are usually lower than the ones for personal unsecured loans. HELOCs are mainly suggested with a 10-year period for withdrawal and 20-year for repayment. 

Home equity loan

Compared to the HELOC, the home equity loan is mostly known as a second mortgage and is provided as a lump sum. The loan is repaid for the defined number of years in the fixed monthly payment, which makes you secured from the market fluctuations. This is a comfortable option if you are sure about the total amount necessary for you. However, if you have additional expenses it might become a problem as for this type of loan, given that your home is again used as collateral. 

Construction loan

If the size of the renovation is planned to be on a large-scale, such as knocking down and rebuilding your home, another possible option to be considered is the construction loan. This type of loan mainly depends on the estimated value of the house after the renovation, which gives you an opportunity to cash out the necessary amount of budget for renovation-related payments.

Other options 

If you are ready to start the home improvement process, as we have presented, you have multiple available options, starting from using your own savings to HELOCs, home equity loans, or construction loans. In case the renovation is small and is based on regular expenses, you can consider also using a credit card or overdraft option. Before using this option, you should note that these types of loans have higher interest rates and additional fees than others. 

You can also look at interest-free loans or grants for specific renovations that might be suggested in your area, for instance, there are certain incentives in some states offered to owners adding solar panels to their houses.

How to apply for a home improvement loan

  1. Apply before you need to start improvements.
  2. Determine how much you need.
  3. Determine your preferred loan term.
  4. Get prequalified.
  5. Consider your eligibility.

Paying from your own pocket

In case you prefer to avoid taking new loans, you may finance the renovation from your savings or other funds you are able to access. This option appears to be easier and less risky than lending a loan if you have enough money to cover all of the home improvement costs.

Using your own finance means you can start your house renovation without worrying about extra expenses afterward. Nevertheless, you need to consider the planning of your savings carefully. You need to check that after the withdrawal of the necessary amount for the renovation from your savings, you still have some emergency money sufficient for unforeseen expenses.

Real Estate Owned Property Renovation Project Overview

If homeowners default on a mortgage, they will be left with two options. Either sell the property and pay the unpaid amount to the lender or ownership will pass to the lender. Banks generally don’t hold defaulted properties on their portfolio. Such as it’s better for them to sell it “as is” at a discounted price in an auction and recoup the missed payments. If the property isn’t sold during the auctions held by the lender it becomes a Real estate owned (REO). For landlords, investors, and flippers REOs are a great way to invest. After purchasing properties in “as is” condition, they organize REO property renovation and put it on the market for sale or for rent.

As REO renovations may be more challenging, it’s important to work with a qualified REO renovation service company. This blog post covers the advantages of REOs and what to look for in a renovation service company before hiring.

What Are The Advantages Of REOs?

Lenders often sell the REO properties at discounted prices during auctions. Such as their aim is not to make a profit out of it, but instead to sell in a short time period in order to recover loan payments that the borrowers were unable to pay on time.

Moreover, banks clear all property taxes and liens for REOs. So, the prospective buyers will not deal with outstanding property taxes and unpaid mortgages of the previous owner.

Landlords and real estate flippers get a high return on investment by purchasing REOs at discounted prices and deploying. After purchasing, landlords lease it to tenants and get a steady income. On the other hand, flippers buy REO properties, renovate, and resell them at a higher market price.

REO Property Renovation Project Overview

REO properties are put in the market for sale “as is” and may need major renovations. Generally, it’s not an issue for flippers, but it affects homebuyers who do not plan to resale and are going to live there.

Compared to other residential properties, REO renovation projects may be more challenging. Given that, you should hire qualified contractors, who have REO industry expertise, a detail-oriented approach, and high-quality standards.

Real Estate Owned Property Renovation Project Overview

REO homes usually don’t have utilities, have junk and debris that must be removed, require a pressure washing of the exterior, have a leaking roof, etc. The REO renovation service providing company should have contingency plans and a specific approach to each REO renovation project.

How To Hire an REO Renovation Service Company?

Below we present the qualities you should look for in an REO renovation service company before partnering up with them.

Matching Team for Each REO Property Renovation

The contracting company should be able to match clients up with the contractors who can best meet their needs for the timeliness, location, and services required.

We have a nationwide network of licensed contractors to complete any big or small renovation services: kitchen, bathroom, basement renovations, additions, whole house renovation, secure the property, remove debris, winterize, and conduct maintenance of the lawn and surrounding areas when necessary.

Dedicated Team of Project Managers

In REO business delays and mistakes are unacceptable. Therefore, appointing skillful and knowledgeable project managers has huge importance for the successful completion of REO renovations.

As a longtime partner to real estate brokers, investors, and mortgage lenders we possess all the resources and experience to meet our customers’ most challenging requirements for each asset and portfolio.

Real estate owned renovation

Expert REO Industry Understanding

As compared to residential properties REOs have more specific characteristics and associated complexities. The hired contractors should have expert REO industry understanding. They must create renovation strategies and perform in a way that maximizes RIO for real estate brokers and investors.

With our decades of experience and nationwide reach, we deliver unmatched quality of REO renovation services,  inspections, property preservation, and appraisals that allow our customers to better focus on their core business.

Prioritizing Efficiency and High-Quality Standards

It is important that the REO renovations comply with current legislation in the area. Therefore, all our contractors are well-trained and have up-to-date information regarding regulatory requirements. From our vendor partners, we require a high level of commitment and professionalism for customer exposure and satisfaction.

Whole House Renovation Project Overview

Even though the scale of house renovation varies depending on the size of the property, scale, and type of renovation, whole-house renovation projects are complex. It requires a great understanding of the process, a detail-oriented approach, and organizational skills. For the successful completion of the renovation project, there are a few strategically important aspects you should consider.

Start by carefully evaluating your future plans connected with the property. Then make sure you can manage and oversee the process from start to finish. And finally, invest in renovations that will add value and increase the price of your property.

kitchen renovation

How to Estimate the Cost of Renovation Project?

The cost of projects may differ depending on whether you are going to do remodeling or renovation. As well as the types of renovations and solutions that you are planning to integrate. The overall cost of the whole project depends on the following factors: the current condition of the home, the scale of the renovation, quality of construction materials, solutions, and the team of hired contractors, etc. To get precise estimates before starting demolition or purchasing any materials consult with contractors.

Renovation vs Remodeling Projects

Generally “renovation” and “remodeling” are used interchangeably to describe the same process, while professionals in the industry refer to different types of construction. Renovation projects are considered to be easier and cover altering a few details, updating the current interior without changing the functionality of the space. Remodeling includes complex design alterations and a number of structural changes or additions that change the purpose of the space. Also consider, renovation projects may or may not require a permit from local authorities. On the other hand, permits for remodeling projects are almost always required.

The Choice of Contracting Service Company

Whole house renovations require managerial skills and the input of professionals. With the help of experienced contractors, you can cut costs, finish on time, make sure all renovations are code compliant, and there will not be a need to redo it over and over.

To trust your house remodeling or renovation project take careful consideration of available options and pay proper attention to the qualifications of the contractors. Our contractors are ready to assist you and turn the process of building your dream house cost-effective and enjoyable. Based on your plans, budget, and expectations we will offer a unique approach and organize the renovation smoothly and professionally.

Focus on Sustainable Solutions

Sustainable solutions may be expensive, and add up to renovation costs. But in the long run, it will pay off and positively affect the price of your property. In the market, the most common solutions are solar panels, living walls, and roofs, smart home systems, etc. If you have a busy and hectic lifestyle, smart home systems will help to better organize everything and support to take care of your schedule and day to day activities. With solar panels, you will save money on your energy bills and reinvest the allocated amount on your property improvements.

Whole House Renovation Project Guide

How Long Will A Whole Home Renovation Take?

The whole home renovation is quite complex and depends on a lot of factors. Hence there is no one-size-fits-all answer to this question. Every renovation project is unique. Each project has its own characteristics and complexities. Therefore, you need to break down the entire project, estimate each aspect, and evaluate the expected timelines of completion. If it’s your first experience of renovating and you struggle with planning, contact a local contractor for advice.

Bathroom renovation project

What Should You Know Before Planning A Home Renovation

If you want to organize a home renovation smoothly and enjoy the process, instead of stressing out and overspending, you should start with planning. Clearly mapping out the whole project prior to start is considered to be one of the key success factors. Planning your home renovation will help to save time, cut costs, and avoid the most common home renovation mistakes.

In the starting stage, a few details are extremely important: cost factors, your budget, timelines, the resale value of renovations, and most importantly the team of contractors who will manage and complete it.

For those who are planning to start a renovation, United Field Services, Inc. created a simple guide consisting of all the important factors and know-how for successfully planning and organizing any type of remodeling.

Clarify Your Renovation Goals

First, clarify the objectives of the renovation: is it for your forever home or you are preparing the property for sale, and are the designed changes “needs” or “wants”?

Depending on the size of your family, the needs and preferences of each member, plus the current state of the property, the remodeling project of forever homes may vary by scope, cost, and type. Start by writing a big list, then narrow down every change you’d like to make. Balance the “needs” and “wants” to organize within a budget and in your desired timelines.

However, if you are renovating for reselling the property consult with a few local real estate agents. Their objective feedback will help you to make the property more attractive to buyers and make the selling process easier. Or do your own research and make sure renovation will add value and increase your home price.

Research and Get Informed

Whether your home renovation is planned to encompass only remodeling a kitchen, simple bathroom makeovers, or just changing the flooring, you are going to face a lot of challenges while making the final decisions. In order to turn your home into a functional and beautiful space on a budget, each aspect must be well thought of and backed on research.

To make sure that later on you will not regret the decisions made during the process, arm yourself with information. Before buying any materials or hiring contractors, thoroughly explore design inspirations, saving, and project management tips.

A few sources where you can start your research and get design ideas are architecturaldigest.com, houzz.com, apartmenttherapy.com, etc. Apart from it, use shopping apps and tools to compare prices before purchasing anything online.

window installation

Types of Home Renovations You May Consider to Tackle

Based on the scope of the project there are 4 main types of renovations: kitchen, bathroom, basement renovations, and additions. Other than that, home renovation projects can be categorized according to their objectives and have the following directions: basic renovations, curb appeal improvements, renovations that add value, and personal “wants”.

For instance, the basics may cover a leaking roof restoration, adding functioning gutters, changing flooring, mold removal, etc. Curb appeal improvements comprise a well-maintained lawn, fresh and modern color of paint, a clean look, and new appliances, etc. Value-added renovations are kitchen renovations, adding new windows, and new siding, etc. Personal preference projects may include adding or redesigning swimming pools, playgrounds, wine cellars, and game rooms. 

Home Renovations That Increase Home value

It’s recommended to do small renovations with neutral aesthetics and focused on improving the functionality. Extensive custom upgrades may be appealing to you but not potential buyers of your property. Therefore, make sure that the return on your investment will be positive. For this reason, consult with a local real estate agent and get valuable advice from them.

For example, the projects that add considerable value and recoup the construction costs are kitchen renovations, new windows, adding storage capacity, improvements in curb appeal.

But there are remodeling projects that are tricky to evaluate in terms of the potential return on investment. For instance, conversions that may not be worth your investment include converting a bedroom into a studio or movie room, enlarging a space by removing walls, extending a room by eliminating a bedroom, big remodeling projects in the basement.

Planning Permission and Regulations For Renovations

You should prioritize completing code-compliant home renovations. Make sure your proposed changes and conversions are compliant with local regulation laws. As a result, you will not encounter any difficulties later on in the inspection process from local authorities or when selling the property. In addition, you will be guaranteed that all improvements are reliable and safe.

However, not all redesigning projects require permits. First, discuss your project with your local building authority. They will provide you the detailed information and available guidelines.

home renovation and remodeling

Create a Home Renovation Budget

Whenever you consider organizing a home renovation, create a comprehensive budget. It will help to set a spending limit, prioritize your spendings, and have a precise plan. Start the budget planning process by evaluating your financing options and the availability of financial resources. If your personal savings are not enough for financing the project you might need to apply for a construction loan, home equity loan, refinance your home loan, etc.

In the budget planning process, the next step is setting timelines, which is followed by cost evaluation.

Identify and Set Timelines

Different factors can affect the timelines of remodeling projects. Major variables are the scope of the renovation and the size of the hired contractors’ team. Also, it’s important to consider the project objectives and what you are trying to achieve by remodeling: an updated look or increased functionality. It may take three weeks to renovate a bathroom with new cabinets and fixtures, but a few months to get a heated floor or a new tile. Typically the longest projects are additions.

You should be prepared for some possible delays which are very common and take it into account while setting timelines. For example, the process of waiting for inspection reports, product/construction material delivery issues, or subcontractors may cause postponements. In addition, the weather may affect outdoor projects. Unforeseen problems may occur during the remodeling process, like rotting wood inside the walls or mold, etc.

A well-scheduled timeline will include the start date, plan for the next several weeks, including possible delays, and the end date. To set a reasonable timeline consult with general contractors by discussing all the components and details of your project.

How Much Will a Home Renovation Cost?

Home renovation costs depend on several factors: the type, scope of the project, materials, and service price of contractors you choose to work with. Consequently, the project budget may range from a few thousand dollars to six-figure digits.

You can get an estimation of the upcoming expenses by consulting with different contracting companies. Contact us directly to get price estimates from our professional crew of licensed contractors. We have extensive industry expertise and are always available to serve you nationwide.

organize home renovation

Hiring Contractors

Contractors are crucial allies in a home renovation project. Not all homeowners have the experience, time, or skills to organize home remodeling and complete it successfully. As a result, hiring a qualified remodeling contractor plays a huge role.

Firstly, to avoid scams or poorly made decisions get multiple bids from at least three credible contractors. Send project bid requests and ask for timelines from each of them. Compare their offers, expertise, team size, and reliability. Don’t be tempted to hire the lowest bid providers.

Next, sign a contract. One of the available options is a time-and-materials contract. Your payment will be based on the time spent by the contractors and on the cost of used materials. If you want to stick to a budget, a better option is to sign a fixed-price contract. In this case, you will pay a pre-agreed lump sum for the project upfront.

Handling Unexpected Problems

Unexpected problems are very common and it’s hard to complete the project without altering your initial plans. For this reason, you have to be well prepared. Be flexible to adjust your original plan, easily solve an accruing issue, and don’t let it evolve into a bigger one.

Some of the issues may arise because of the outdated plumbing systems, electrical wires, bad renovation work done by contractors, material quality or availability, etc. Therefore, construction professionals recommend setting aside an extra 10% to 15 % in cash to be able to cover additional costs caused by unforeseen problems.

In conclusion, do your research and plan every detail. Don’t hesitate to discuss your renovation plans with real estate agents, general contractors, interior designers, and architectures. Make sure that the renovation will be worth investing your time and money. Based on the project type, scope, and objectives all variables may be different. To clarify details about renovation costs and the timelines specific to your renovation project consult with professional contractors. Our experienced team is ready to assist you in your journey of planning your dream house!