Funding A Remodel

Remodeling a home, especially in a world of constant volatility for material prices, can be an extreme undertaking.  Especially with the market rates for things such as lumber, steel, fuel, and manual labor constantly changing as commodities, knowing how to fund a remodel can be very overwhelming.

Funding a remodel, however, doesn’t have to be overly stressful.  In fact, there are some things you can do to make sure you define a budget, get the funding you need, and stay on track for the duration of your project.  Here are our tips for funding a remodel.

Know How Much You Can Borrow

Even if you have a beautiful plan for your home remodel, and your contractor has definitive plans, material costs, and labor outlined, it helps to know just how much you can actually borrow and what your borrowing strength is.  There are many factors that go into evaluating a borrower’s ability to repay a loan, but it isn’t exactly rocket science.

Your lender will look at a number of areas including debt-to-income ratio, assets, liquidity in bank accounts, credit history, your credit score, and may even require references to prove your worthiness as a borrower.  Naturally, the better your marks are in these areas, the more you can borrow and the less risk your lender is taking in giving you more for your remodel.

Know Your Loan Amount

The amount of your home remodel loan will be determined in large part by how much the remodel will add to your property value as determined by an appraisal.  Your lender will look at the renovations you’re making, look at historical property values, and make a designation for just how valuable your remodel will be in the end.

Lenders have very little recourse in the event of a borrower defaulting on a loan except for the property that is issued as collateral.  That said, lenders will not stretch the truth or go too far beyond what an appraiser or real property values would indicate your remodel would add to your current house.

Shop for Contractors

Once you know what your loan amount will be, it’s time to put a pen to paper and start shopping for contractors and builders.  There are a number of ways you can go about this.  You could simply hire a general contractor to oversee the work being done to your home, work with the subcontractors on scheduling and the scope of work, and take care of monetary distributions.  Otherwise, you can be your own general contractor.

Many homeowners like the idea of being their own general contractor and generally saving the 20%-or-so GC markup on subcontractor work; however, unless you have experience in construction and know how to work with tradesmen, this could prove to be a nightmare and end up costing your more than you would save.  Just understand that a general contractor does what they do for a reason, and hiring a good one will save you time and headache!

Find the Right Lender

Finding the right lender should be the first thing you do, but it’s often the last thing most homeowners consider when funding a remodel.  It’s easy to start shopping around for contractors, materials, and designs before you secure your budget and dial in the funding you need to get the project done.

It’s important to shop for lenders who have experience with remodels, know the game of property valuation, and generally have a very well-rounded knowledge of the real estate and commodities markets as a whole.  For this, contact Tidewater Mortgage Services, Inc.  For over 20 years, Tidewater has helped homeowners like you build, remodel, and buy the homes of their dreams!

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