If you are considering making some upgrades or major repairs to your house, here are five things you should know if you are considering a home improvement loan.

If you own house long enough, eventually you will reach a point where you are at least considering remodeling. Maybe your home needs some significant repairs due to wear-and-tear, or maybe you are finally sick of your kitchen and decide that it needs a facelift. Either way, you’ll need to make some decisions – including how to pay for it.

If you are in a position to pay for it out of pocket, more power to you. If nothing else, it can add value to your house, so it’s not hard to justify the expense. Realistically, however, paying for a remodel is easier said than done. Putting aside the dent it will put in even the best savings accounts, remodeling costs can often run higher than expected. It’s good to have some flexibility with the amount available to you. If you’re paying out of pocket and the costs are more than budgeted for, you might find yourself in trouble.

The obvious and most common way to pay for a serious remodel is to look into a loan. There are a few different options available to you based on multiple factors – including your credit, available assets, existing loans, etc. – but regardless of the exact path you take, there are a few steps you should consider.

For this article, we reached out to Gary Lawrence, a Senior Mortgage Advisor operating throughout the Pacific Northwest, with an office in Vancouver, Washington. Gary has been helping people with loans for many years, and he has a few tips for those looking to secure a loan for a home remodel.

If someone wants to get a home improvement loan for a remodel, what should their first step be?

The first step would be to get pre-approved with a mortgage advisor for a construction or rehab loan. The next step would be to get a quality bid from a licensed construction company. Five Things to Know When Considering a Home Improvement Loan

Who should they go through to get a loan?

There are many options to choose from in the Portland and surrounding areas. You would want someone with extensive knowledge and experience on the construction or rehab loans you want to pursue.

What is the process of getting a loan for a remodel?

Get a bid, get pre-approved, have the home appraised, and then fund the loan. Once the loan funds the work would start.  When the work is complete the home would be re-inspected, and then the loan would be finalized into a fixed rate. 

During the work phase of a construction loan, you’re only paying for an interest-only loan. Once the work is complete the loan gets rolled into a 15 or 30-year fixed rate. 

How much should someone take out for the loan? Should they add a specific percent over the quote?

They would need 25-percent down for most construction loans. For a refinance, rehab loan, the existing equity can be used for the down payment. For new construction, the land itself can be used to cover the down payment. Through the bidding process, the lender will allow for up to 10-percent over the quote. 

How should they plan their repayment schedule?

The loan can be based on a 15 or 30-year fixed rate, and would come with zero pre-payment penalties. 

Starting a remodel can be a daunting process., but you don’t need to do it all on your own. If you are considering a major home remodel, contact Fleschner Construction now to arrange a consultation. We can help you make sense of all the steps you will need to go through, and offer advice and how to procced.