Renovation HELOC Loan
Home improvement projects can add value to your home as well as increase your standard of living. To finance these projects, many homeowners turn to a home equity line of credit (HELOC), which provides a flexible financing option for major home improvements.
CrossCountry Mortgage has helped many homeowners secure a renovation HELOC loan for home improvement. Here’s what you can expect from this versatile option.
What is a renovation HELOC loan?
A home equity line of credit (HELOC) allows you to tap into your home’s existing equity and convert it into cash. In a HELOC, you won’t receive your loan as a typical lump-sum payment.
Instead, you’ll be granted a line of credit, allowing you to borrow up to a certain amount, called your credit limit. CrossCountry Mortgage allows you to borrow up to 90% of your post-renovation value when you obtain a renovation HELOC loan.
As long as you keep repaying the balance, you can continue to use the HELOC during the draw period. During the repayment period, you’ll pay back any of the money that you borrowed. However, homeowners tapping into their equity only pay interest on the amount they actually borrow, which can save you money over the course of the loan.
How does a home equity loan work for home improvements?
A renovation HELOC is not your only funding option for home improvement projects. You can also convert your home’s equity into a lump-sum payment through a home equity loan.
A home equity loan can also be used for renovations, as well as other personal expenses. You’ll then make monthly payments to repay the balance of your loan, and your interest rate will depend on the size of your loan, your credit score, and your financial history.
HELOC vs. home equity loan for remodel
Which option is better for home renovation projects: a HELOC or a home equity loan? Both rely on your home’s equity, but each has slightly different features.
For example, a renovation HELOC loan will have variable interest rates, which means that the cost of the loan is subject to market fluctuations. However, HELOCs can offer high credit limits and flexible options, which can be ideal for certain types of renovation projects.
Home equity loans are more predictable thanks to the fixed interest rate, and you’ll repay the loan amounts in regular monthly installments. Still, borrowers might consider a HELOC when they need the flexibility to complete major home improvements.
Keep in mind that in both cases, your home itself serves as collateral, so you risk losing your home if you’re unable to pay the loan. If you fail to use a home equity line of credit (HELOC) for home improvement, you can always turn to personal loans or even credit cards when making small changes to your property.
The team at CrossCountry Mortgage can help you clarify your goals and choose a financing option that’s right for you.
Renovation HELOC loan pros and cons
Renovation HELOC loans have both advantages and disadvantages, which you’ll want to carefully weigh before jumping into your next major project.
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Pros
Positively, a renovation HELOC loan offers:
- Flexible financing options for a variety of personal needs
- Lower interest rates than personal loans or credit cards
- Interest payments that are tax-deductible as long as you use the loan for renovations
Additionally, HELOCs can be used for a variety of personal financial needs, so you can use a HELOC for both renovations and paying down debt.
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Cons
The cons of a home equity line of credit (HELOC) for home improvement can include:
- Variable interest rates make repayment less predictable
- House is on the line if you fail to repay the loan
- Potential to run a high balance during the draw period
Despite these potential disadvantages, many homeowners discover that the flexible terms make applying for a home equity line of credit (HELOC) for home improvement a good option for renovation projects.
Renovation HELOC loan requirements
To qualify for a renovation HELOC loan, you’ll need:
- At least 10% equity in your post-renovation home value
- A strong credit score
- Sufficient income
- A reliable payment history
- A low debt-to-income ratio
Unlike some lenders, CrossCountry Mortgage only requires 10% equity in your post-renovation home value. This makes it easier to fund major renovations, as well as to fund fixer-upper projects almost as soon as you move in.
How to get a renovation HELOC loan
Ready to get started on obtaining your own renovation HELOC loan? Contact the experienced team at CrossCountry Mortgage to learn how our experienced team can help you maximize your home’s equity and tap into that value for renovation projects.
Renovation HELOC loan FAQs
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Many homeowners discover that HELOCs are great for renovations since they offer flexibility and high financing amounts. Just keep an eye on how much you’re using during the draw period to avoid overspending.
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Yes! You can cash in on your home equity through either a home equity loan or a home equity line of credit.
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You can get a HELOC to improve a fixer-upper, but remember that your loan amount depends on the equity in your home. Thankfully, CrossCountry Mortgage only requires 10% equity in your home, so you have a stronger chance of getting started right away.
Related articles
Buying a Fixer-Upper Home
Renovation vs. Remodel
HELOC for Home Improvement
Are Home Improvements Tax-Deductible?