Basement finishing requires a big sum of money, but it’s really a good investment if you consider its benefits. The extra finished square footage will raise the worth of your house, and the additional living space will enhance its functionality and comfort. For the majority of the homeowners, it’s not feasible to go for a basement remodeling project due to the lack of funds. But nothing to worry as you can finance your basement with the help of a loan. Let’s have a look at the key financing options for your basement remodel.
1. Home equity loans
This type of loan uses the equity value of your house as collateral. The amount of loan depends on your property’s value, which is decided by an appraiser who belongs to the lending institution. Home equity loans can be obtained for a period of 5 to 15 years. The loan amount needs to be paid off in full if you sell your house before the completion of the term.
2. Personal home improvement loans
If your home’s equity is not sufficient to apply for the home equity loan, then a personal home improvement loan is an ideal option. It is an unsecured personal loan, and thus, not pledged by your house. The interest rate will depend on your creditworthiness, which is generally fixed and you have to pay fixed monthly payments. The term for a personal home improvement loan usually ranges from 3 to 5 years that might or might not include repairs.
3. Home equity line of credit
It is abbreviated as HELOC. This type of loan is secured by your house that provides you a rotating line of credit. This loan works like a credit card in which your available credit is refilled as soon as you repay your overdue balance. You withdraw against the account when required, and then repay your borrowed amount along with interest.
4. Cash-out refinance
This loan replaces your current loan with a new house loan for an increased amount than you already owe on your house. It’s basically loan refinancing so that you can get a larger new loan than before. Here the bank raises your loan amount, and gives you the difference in cash so that you can remodel your basement with porcelain tile.
5. FHA title 1 loan
It’s a fixed-rate loan that is best suited for home repairs and improvements projects. An FHA title 1 loan is specially designed for those who don’t have sufficient equity to be eligible for a house equity loan. It’s maximum term is 20 years and $25,000 is the highest loan amount. It’s payment plan is generally affordable. You should have a 45% or less debt-to-income ratio to qualify for this loan. Also, your home should have been constructed and inhabited for at least ninety days, and you must confirm that loan amount is utilized for specifically-planned property improvements.
If you are interested in getting more information about basement financing options, then feel free to contact Penguin basements in Brampton. We will help you find the best financing option for your basement in and around Brampton.