With a higher demand for housing and not much inventory on the market, homeowners have begun to turn inwards to meet their housing needs. The Coronavirus caused many businesses to rethink how employees can be utilized in the workplace, in-person and at home, and because of this, homeowners began to spend a lot more time at home. In the aftermath of the pandemic, many employees still work from home.
According to Bloomberg.com, remote workers are looking for a cheaper place to live. Because of its low cost of living, Arizona is one of many places remote workers choose as their home base. This has caused housing prices in Phoenix to increase. Although while prices may be up, interest rates are low. To circumvent the cost of buying a new house, many homeowners pursue a home renovation loan.
What is a Renovation Loan?
A renovation loan is a type of loan that can be used to improve, remodel, or repair a house. The building costs are wrapped into a mortgage, so unlike other loans, homeowners won’t have to worry about two sets of payments. Renovation loans use a home’s estimated value to calculate how much homeowners can borrow. This helps them get the lowest rate possible, since loans take the value of the home after renovation.
What are homeowners renovating?
Depending on what a homeowner is looking to renovate determines the interest rate, monthly payment, and the total amount of money to borrow. What homeowners renovate can vary from:
- New Appliances
What type of Renovation Loan?
There are a few different types of Renovation Loans. When shopping for this type of loan, lenders should be able to provide homeowners with the clairvoyance homebuyers need to make an informed decision.
- Cash-out refinance
- Home equity
- Home equity line of credit
Is the time right for a renovation loan?
Interest rates are low. But they might not stay that way. In response to the Coronavirus, the FED cut interest rates to near all-time lows. As the nation begins to move forward and find ways to remediate the impact, people are beginning to use a renovation loan to turn their house into a home. And at the end of the day, the most important thing to consider is if a renovation will reduce long-term costs or increase the value of the property.