How can I get a loan to fix up my house?

How can I get a loan to fix up my house?

How can I get a loan to fix up my house? So you want to sell your home. That’s great! The housing market is on an upswing right now. Houses leave the market fast with high-cost buyers ready to make a move as soon as the offer is solid. But what if the offer isn’t quite so solid? What if there’s a soft spot in the floor, the paneling, some untreated damage or outstanding issues that affect the resale value? Nevermind selling a home, what if it’s a home that’s hard to live in?

If you plan on making money with your home, and you know it’s worth more than the pre-fix estimate, you may consider reconstruction efforts to fix up the house, solve its problems and increase the value before going to market. But that costs money, too. If you had the money to build a house, you wouldn’t need to sell one so fast. It’s a dead end problem. How do you pay to sell a house?

Paying out of pocket is not feasible for most. Not everyone is a skilled carpenter or home repair expert. However, just about anyone can get a simple loan to fund their repair efforts and then pay it off with the profit made from the sale. There are plenty of different loans you can get which will serve you well as you remake your house for the buyer’s market.

Home Equity Loan (HEL)

If your home is already highly valued, but with enough obvious issues to make it unattractive for the market, you can borrow against the established value, or equity, of your home as it stands. Home equity is the home’s value, minus the outstanding balance of a mortgage. For those with a mortgage, this doesn’t get rid of it – it adds to it, meaning more long term payments on the house.

The interest rates are usually fixed and loan terms can last for up to 30 years. These are more for loans to undergo a big project, something huge that will add serious value to the home in the long run, which will make it a better sell for a higher profit. If you already have a good home, but want to drive up the cost a little more, an HEL is a great choice.

Home Equity Line of Credit (HELOC)

A HELOC is very similar to an HEL, but it works based on a line of credit. Rather than refinancing, the loan must always be repaid in full and is tied directly to your credit score, so it can be dangerous to take on if you’re not prepared for the consequence. There’s no minimum for a home equity, but there’s also no way to go higher. Rates are up to the loaner, too.

These are better for quick turnarounds or small jobs where you need a little extra money that you can afford to pay off soon. If you’re close to closing a deal and know you can sell the home fast once it’s repaired, you can take a HELOC and knock out the job before the first payment is due, then pay it in full and come out with greener credit and a decent profit.

Cash-Out Refinance

Cash-out refinancing is a refinancing strategy, not a loan, but it works by exchanging your current mortgage for a new one with a larger balance. Then you get a payment, in cash, from your old mortgage which the new one replaced based off the adjusted equity of the home.

It’s not a new mortgage on top of the old one, the old one is paid off by the new mortgage and the difference in cash is paid to you. You still have to pay off the new one, but you get cold hard cash that you can spend on anything without restriction. If there are costs for repairs that aren’t covered by specific loans or if your regular lenders won’t trust you with a credit line, this is a great option for a fast turnaround of cash to labor, and then house into profit.

203(k) Rehab Loan

Private loan lenders can be brutal with rates and adjustments. They follow their own rules. The Federal Government sticks to the books as written and stays within the lines. A FHA 203(k) or Rehab Loan combines closing cost payments and loan payments into one loan. The stipulation is that the loan must be spent on home improvement. Only one payment services both purposes.

The down payments are low, but so is the renovation limit of up to $5,000. It’s great for consolidating repair costs and closing costs into one loan, but the repairs will need to be easy to fix in the first place for such a low ceiling. If the costs go outside of what the government considers “home improvement projects”, it can’t be used, so you’re playing by their rulebook now.

Personal Loan

Possibly the riskiest, but also most potentially rewarding, is a personal loan. It’s a plain Jane regular loan that most banks or lending agencies will offer. Personal loans are unsecured, making them the fastest to obtain. They’re also fast to close, with maximums of two to five years even on the best credit. They’re out to make money off of you, whether you get your house sold or not.

But the loan amount and interest is adjustable. You can get a way better loan than you think if you have substantial equity and a high credit score to start with. Because they’re fast, they can be used for emergency repairs, like a HVAC system or plumbing. If the sale date is closing in and something goes wrong, a quick personal loan can take care of it and leave you with plenty of time to spare.

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