How to Pay for a Home Remodel in the Minneapolis Area
A home remodel is an exciting opportunity to create a space that better fits your lifestyle, adds value to your property, and enhances your comfort. However, figuring out how to pay for a renovation can feel overwhelming. The best approach depends on the size of your project, your financial situation, and the type of financing available. Here’s a guide to help you understand your options as well as recommendations for preferred lenders who can help you and make an informed decision that’s right for you.
Cash and Home Equity Loans for Smaller Projects
For smaller remodels, using cash or a home equity loan is often the most straightforward and cost-effective approach. If you have savings set aside for home improvements, paying in cash allows you to avoid interest and keep your financial obligations minimal.
A home equity line of credit (HELOC) is a great option for moderate-sized projects. This type of loan lets you borrow against the equity you’ve built in your home, typically offering lower interest rates than personal loans or credit cards. It’s an excellent choice if you’re confident in your ability to repay the loan and want a predictable payment schedule.
Stepping Up to Larger Remodels
When you move into a larger-scale remodel, financing becomes a more complex decision. Some homeowners have a great rate on their primary mortgage and hesitate to refinance. If this is the case, a HELOC may be used to finance a phase of work rather than completing all work at once. A HELOC allows you to borrow money as needed, rather than taking out a lump sum loan. This flexibility is especially beneficial if your remodel will happen in phases.
Construction Loans for Major Renovations
If you want to have a large project completed in one movement, a construction loan might be necessary. The loan amount is based on the future value of your home after improvements are complete.
A construction loan requires refinancing your entire mortgage, meaning you’ll take out a new loan that replaces your current mortgage. This option works best for homeowners who are comfortable with a total refinance or have strong equity in their home. Because these loans are structured based on the projected value of your home, the new home value provides you with resources to pay for your home renovation.
Multi-Phase Remodeling and HELOC Opportunities
If your remodel will be done in multiple phases, you can take advantage of increasing home values along the way. After completing an initial phase of work, your home may appraise at a higher value, making a HELOC a viable option to fund future phases.
As interest rates fluctuate, homeowners are also reconsidering how they fund their renovations. If rates drop, refinancing might make more sense, giving you better financing terms while securing the funds for your remodel. Working with a trusted remodeler and a knowledgeable lender can help you determine the best time to refinance.
Buying a Home with Remodeling in Mind? Plan Ahead!
If you’re in the process of purchasing a home with the intent to renovate, it’s crucial to talk to a remodeling expert early in the buying process. Some lenders offer construction loans that bundle the home purchase and renovation costs into one loan. By working with a remodeler before closing on the home, you can determine what the costs will be, for inclusion in this type of loan. This approach can save you from having to refinance later and provide a smoother transition into your dream home.
Choose a Lender with Remodel Expertise
No matter the size of your remodel, careful financial planning with a qualified lender is essential. Sicora Design/Build has financing connections that we can provide you with as a starting point in your research. Feel free to reach out to us and we’d love to connect you with them!
Work with Sicora for a Smarter Remodel
At Sicora, we specialize in helping Minneapolis area homeowners navigate the remodeling process from start to finish. If you’re considering a home renovation or purchasing a home with remodeling in mind, reach out to us early in the process. We’ll work with you to develop a plan that aligns with your vision and financial situation, ensuring a seamless and successful remodel.
Financing Options
If you are evaluating ways to finance your project, here are a few contacts to connect with:
Gail Vinje, of Supreme Lending: gail.vinje@myccmortgage.com or 612.670.4230
Lisa Blanksma of Bell Bank: lblanksma@bell.bank or at 952.905.5322
