Five Points to Consider Before a Major Remodel
We’ve seen a steady increase in major home improvement projects that require financing. It’s a popular option for those that love their neighborhood but need room to expand.
Great Midwest Bank is one of just a few local banks that specializes in major renovation loans. With our experience, we’re able to offer a few tips if you are considering a renovation:
Start the process here.
You’ll do yourself a favor by sitting down with one of our Loan Officers before you get the ball rolling too far down the road. From experience, we’ll likely have a “ballpark” idea of what your project will cost. Beyond that, we’ve seen a number of projects through to completion and can offer insight on which local Contractors you may want to consider. You’ll appreciate going through the pre-approval process first.
Don’t expect a dollar-for-dollar return.
It’s easy to get emotionally tied up in your own home and project. But costs are often higher than borrowers expect, and the budget rarely translates “dollar-for-dollar” into home value. You’ll have to realize that some of what you’re spending has some intangible value (i.e. your kids keep the same neighborhood friends or you commute remains short).
Square footage – and bedroom count – mean everything.
If it’s reasonable to do so, adding square footage – and especially adding a bedroom – is the best return on investment. Updating a kitchen or bathroom is meaningful – but these projects won’t translate as well to additional value when the appraisal is performed.
You may need to say “goodbye” to your current fixed-rate mortgage.
Depending on the project scope and your equity in the home, we most often use a Portfolio Loan using an Adjustable Rate to provide construction financing during renovation. Once the home is again complete, we can consider a refinance back into a fixed-rate loan. The good news? Rates are still historically low.
A home equity line of credit may be just the ticket.
For those borrowers fortunate enough to have significant equity, a line of credit can be a really handy option to fund a renovation project. When you’re finished, it may also make sense to roll it into a new refinance.