Financial literacy is being able to comprehend and apply effectively various financial skills. These skills include property management, financial management investment and budgeting. Business knowledge helps one to be stable and self-sufficient. How does knowing your finances help you to acquire loans for renovating your home? Also, find out different financing options you can get for your home renovation.
In general, financial literacy involves savings, planning and management. Lack of information about your finances may lead to many wrong decisions, which may plunge you into a financial crisis.
Renovations loans help you increase the value of your property by essential points depending on the current market value for the property. Knowing your finances helps you to plan and execute your desire to improve and sell your property to earn an extra profit from it. Therefore, instead of selling short and missing out on the additional benefits, you opt to wait, renovate and earn more.
Furthermore, financial literacy is what informs the need to renovate by highlighting the costs of the exercise against repurchasing it is a dwelling unit.
The amount you can borrow for renovations is entirely dependent on the scope of the exercise. The extent of the refurbishment informs the amount you need. Usually, people tend to borrow what they are eligible to be credited with. This is a financial blunder that you may not want to make. Loans meant for such exercises should be repaid with interest. If the cost of selling does not raise the amount needed to repay the loan, the interest and have some profits remain, then your financial decisions would have retarded on this specific aspect.
Banks give the borrower options to repay the loan. For instance, if the amount of renovations is not that substantial, then the bank can expect repayment in lump-sum. However, if the scope of the renovations resembles lifting the house from the block and tearing down some walls, then you may pay your lender in instalments for an agreed period.
Financial literacy will also help you to know the best timing to apply for a home renovation loan. Usually, the application should be tendered in advance to allow time for assessing and approval. With substantial equity in the property you wish to renovate, you may get more money for the work and approving may take much less time than when you are having limited equity in the asset.
Types of renovations
The type of renovation you intend to apply determines the amount you are likely to spend. This, therefore, translates to the number of loans you may want to apply for. With lenders, like Fortune Credit, banking on your equity on the property and your creditworthiness, you can be eligible for what your credentials inform them. This, therefore, means you are bound by the same factor to choose your type of renovation as the amount you can apply to get. Popular types of renovations you can consider are listed below.
*Non-structural renovations. Here, the banks arrange for a sight-seeing exercise where specialists evaluate the value of your house. Thereafter, you are given a leeway to apply for up to 90% of the total value of the property.
*Cosmetic renovations. This expense can be a bit manageable for you. The house is only elevated by the feel and looks. However, the interior structure and integrity remain the same. Basically, it focuses on beautifying your house by painting, removing old and wrong looking structures, replacing the wallpaper, etc.
*Kitchen and bathroom. Kitchen is considered by many as the heart of your home. The bathroom, well, it ought to look nice; an average human being tends to spend a lot of time in there. Having these spaces up to date and fresh serve you a whole lot of points.
*Structural and significant renovations. This kind of renovation focuses on a complete reshape in the structure of the house. It involves feeling of walls, erecting new ones, and general housing restructure. This can be a costly affair. Therefore, the lender will send for a complete overview and the total cost of the house once it is done.
*House extension. Maybe you want to include a garage or say your family has grown and you need to increase the house capacity. You can apply for a loan on this reason.
Home equity lines on credit. This is a second mortgage on your home. It is given on a lower interest due to enhanced equity in the home. However, you may run the risk of spending more on renovations than the cost of your HELOC. Therefore, to avoid such a mess from emanating, you need to perform a cost analysis to ensure that you stay within your budget. Hence, financial literacy helps you in such instances.
Construction loans. For a construction loan, you are advanced money in trickles over the period of the construction. So, after the completion of the process, the total costs are considered, unlike the home equity loans.
Personal loans. Personal loans can come in handy are small renovations such as painting and light replacements such as carpeting in your home. Personal loans are more flexible and do not have a specific amount you are allowed to apply. This is where financial literacy kicks in.
The Bottom Line
Property renovations are crucial to enhancing the value of your asset, especially if you want to resell it. However, it is healthy to consider the financial implications of the project. Amassing hefty debts may quickly plunge you into financial debt that will ultimately make you a slave to credit. Taking a loan against your home may even expose you to possible foreclosures and loss of shelter.
Since you may never want to throw your family on the streets, consider a viable plan by crunching your numbers right before offsetting the balance that you enjoy in the comfort of your home