8 Tips for Getting a Kitchen Remodel Loan
Average kitchen remodels cost homeowners between $12,000 and $33,000. If the kitchen has all the bells and whistles, it could easily reach $50,000 or more.
Remodeling your kitchen is no easy task; it requires time, planning, shopping, and lots of cash.
An upgraded kitchen holds many benefits, like increasing the value of your home and improving the overall look and feel of your home’s interior.
But without the proper funding, a kitchen renovation can seem impossible.
Thankfully, there are ways to get the money you need to make your kitchen dreams come true. Let’s explore what they are so you can get started on your vision.
Home Renovation Loans
Sometimes home renovations cannot wait, and you need money quickly. In the case of a kitchen remodel, the problem isn’t simply cosmetic, but a broken pipe or something more severe.
There are a few options for funding your kitchen remodel:
1. A Home Renovation Loan or Line of Credit
A home renovation loan is a loan that’s taken from the equity in your home. Even though the equity is the portion you own, lenders decide how much they will loan you.
The interest rate is typically low, if your credit is good, and you receive the money as a lump sum.
You can also request a home equity line of credit which is similar to a home renovation loan, the only difference is a line of credit works very much like a credit card.
Be advised though, that you use your home as collateral for this type of loan. Should you miss a payment or be late, you could lose your home, because equity loans operate as a second mortgage.
2. Personal Loans
Personal loans are unsecured types of loans, meaning they lack collateral. They can be used for many different needs such as education, home repairs, or debt consolidation.
They’re fairly easy to obtain with just a few personal documents needed and the money is deposited in your bank account within a few days.
Personal loans are a preferred way to pay for home repairs or renovations because you can choose the specific amount needed.
8 Tips to Get Your Kitchen Remodel Loan
Ready to apply for a loan to get your kitchen started? Here are a few things to know first.
1. Calculate Your Cost
Those beautiful kitchen renovations on television are magnificent, but not always financially friendly. Before you take out any loan, asses how much your renovation will cost.
Working with a designer can help you hammer out any additional expenses that you may have dismissed.
Once you’ve figured out the cost of your project, add an extra 10% to cover unforeseen expenses.
It’s wise to cover all your basis if something goes awry with the renovation, as almost always is the case. No renovation is without its challenges!
2. Shop Around First
Now that you’ve established the amount you need, it’s time to shop around for your loan.
Be sure to look at your credit score before applying to know where you stand. A score above 700 should not have trouble securing a loan.
3. Never Fear If You Have Bad Credit
For those with bad credit, it’s still possible to obtain a loan. Bad or poor credit is classified as having a credit score under 600.
You may need to do a little more shopping around and find a bank that specializes in working with those who have average or poor credit. Credit unions are usually willing to work with you.
Though a loan is still possible, your rate could be higher depending on your score and other financial factors.
With bad credit, consider pre-applying first to see if you qualify for gaining a loan.
4. Gather Necessary Documents
When you’ve found the loan for which you want to apply, gather the documentation and begin the application process.
Most loans require at least proof of identity, proof of employment and other similar documents.
Find out what you need ahead of time to make application easy and smooth.
5. Find Out How Much Equity You Have
If you’ve decided to take out a home equity loan or line of credit, you’ll want to find out how much equity you have in your home.
This is important so you know the amount that you can borrow.
Finding the equity in your home is relatively easy with an online equity calculator.
6. Weigh Your Options
Sometimes it’s difficult to know which loan to choose. The best route would be to compare a personal loan, home equity loan or line of credit and their rates.
As mentioned before, make sure it’s a payment you can afford, and take into account the length of time it will take to repay the loan.
7. Make Sure You Can Repay The Loan
No matter what loan you choose, you will have to be diligent about making monthly payments. Look over your budget and see if the payment will be feasible with your income.
Being late on payments can damage your credit score. Additionally, if you choose an equity line of credit and miss payments, you could potentially lose your home.
8. Review Your Agreement With Lender
You’ve applied for your loan and it’s been accepted! Before the hard work of renovations begins, review your loan and make sure you and the lender have agreed on the terms.
Look over the rate, length of loan, payments and due dates. Now is the perfect time to ask any questions.
Dream Come True Kitchen
A kitchen renovation is a truly big project, but it doesn’t have to be impossible to afford.
With a little research on your equity, credit score, and loan shopping, you can plan the dream kitchen you love to make memories in for many years.