How to Finance a Home Renovation
Renovating a home often requires financing in order for the homeowner to pay for the job. Working with the lender that holds the mortgage on the home is usually the easiest way to proceed. The homeowner can take out a second mortgage to finance the renovation or refinance the first mortgage and add the renovation cost to the balance.
- Ask your contractor for a written estimate for the cost of your home renovation. Review the estimate with the contractor so you understand the pricing. If you want to get a second estimate, contact another contractor so you can compare the two renovation costs.
- Search online to find the interest rate for first and second mortgages in your area. Pull up a search engine and type ”mortgage interest rates” in the search field. Write down the lowest first and second mortgage rates that you find for your city.
- Call your first mortgage lender and ask to speak with a mortgage loan officer. Tell the loan officer why you are calling and find out what you need to do to apply for a home renovation loan. Ask the loan officer to analyze your credit request to help you determine whether a first or second mortgage is the best way to finance the project.
- Complete the loan application and submit it to the loan officer for approval. Once the loan officer contacts you, set up a meeting to discuss the financing in person. Ask the loan officer to show you the cost comparison for both a first and second mortgage. Decide which way to proceed and set up a time for the loan closing.
- Contact your contractor once you close on the loan. Give the contractor the loan officer’s name and number so they can arrange payment for the renovation project. Call the loan officer after a few days, to make sure you do not need to do anything else in order for the contractor to start the project.