Upgrades to a home can include interior or exterior changes, and both can add interest and value to a home. Exterior home improvements can add to a home’s curb appeal and might include fresh paint, an attractive front door, landscaping, or outdoor lighting. Improvements made to a home’s interior might be as simple as updated lighting fixtures, painting or replacing trim, or installing new curtains.
Exterior Improvements
house upgrades listed here might be considered a low-end renovation, which could average between $15,000-$45,000 for a 2,500 square foot home. If, once momentum gets going, the low-end house upgrade turns into a middle-end one, the average cost could range between $46,000-$70,000.
If calculating upgrades by the square foot, figure between $10 and $60 per square foot, depending upon what you’re doing (knowing that the room being renovated can cost up to $150 per square foot).
Another cost-related factor is where the home is located. Pricing in urban areas might be twice as high as in rural areas, depending on the area’s costs of living.
Plus, upgrades in older homes may take more time and attention to complete. If the home is officially considered to be historic, there may be guidelines about what changes can be made.
Financing a House Upgrade
Sometimes, homeowners are able to pay for these upgrades out of pocket. This can be true when the costs are relatively small or when money has been saved for the costs of the renovation. This can be the smart choice when possible: no debt, no interest to pay.
A downside to paying for home upgrades with cash may be that the homeowner empties a savings account or cuts corners on the renovations to avoid needing to borrow funds. Or, if an emergency occurs and the savings account was used to renovate, then high-interest credit cards might need to be used to address the emergency.
Friends or family members may loan the homeowner some money for a house upgrade, and might offer better repayment terms than a financial institution would, whether in the interest or the term. If the homeowner has trouble paying the loan back, the personal relationship with the friend or family member might be damaged. There may also be tax consequences if the loan is considered a gift by the IRS, so it can make sense to consult with a tax professional before moving forward with this plan.
A home equity line of credit (HELOC) might be another option for a house upgrade. This type of loan allows the homeowner to borrow against the equity in the home to pay for renovations. How much is available to borrow will depend upon how much equity is available and the loan-to-value ratio (LTV) that a lender permits.
For example, if a lender has an 80% LTV ratio, that means the institution would:
• Appraise the home (e.g., $250,000).
• Calculate 80% of that ($200,000).
• Subtract current mortgage balances (e.g., $125,000).
• Consider what’s left over ($200,000-$125,000 = $75,000) to be equity in the home.
The lender would also consider the financial profile of the borrower when reviewing the loan application. HELOCs often have a low initial interest rate and, usually, the homeowner can choose to pay interest only during the draw period. Initial costs can be high and, many times, the rate is variable with high lifetime caps.
Another option might be a home improvement loan, which is an unsecured personal loan and not attached to the home’s equity. Funding can usually be granted more quickly with fewer fees—or, in some cases, no fees.
This may be a good option for people who don’t have enough equity in their homes for their project or who don’t want to use their home as collateral.
The Takeaway
Borrowers who qualify for a low-interest, unsecured personal loan with SoFi can use the funds to renovate their home without needing to put the property up as collateral.
The average time from online approval to funding is seven days, getting money into your pockets more quickly. Because the interest rate is fixed, payments are, too, making it simpler to budget—and there are absolutely no fees.
Interested in a personal loan? Apply for one with SoFi today.
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Source: sofi.com