Most new homeowners adapt their property to suit their needs. To pay for the changes, which can cost thousands of dollars, you might need to get renovation loans in Montgomery. These can either be included in your mortgage or separate, and they can help you to live more comfortably, improve the value of your property, or save money every month. Read on to find out more about home improvement loans and mortgage lending in Montgomery, TX.

Mortgage Lending in Montgomery, TX: 8 Things to Know About Renovation Loans in Montgomery

1. You Can Get a Separate Loan 

If you need money for a renovation project associated with your new home or a property you’re flipping, you can get a loan that is separate from your mortgage. This is a good choice for people who would not like to take out more money against their homes or those who are not eligible for a larger mortgage. Home improvement loans are usually not secured against any kind of collateral, so they are based on your creditworthiness. 

Many of these loans last for up to five years, so they need to be repaid relatively quickly when compared with a mortgage. The payments are usually higher in the short term because there is no asset backing the loan.

2. You Can Combine Your Loan with a Mortgage 

Most homeowners prefer to combine their loan with their mortgage. If you choose this option, you will take out enough money to cover the value of your home as well as the necessary repairs. In this case, the loan might be backed by your property, so it won’t be as expensive as an unsecured loan. What’s more, the term of the loan will be more flexible, and you can pay back the money over a longer timeframe if necessary. 

If you’ve found a property you love and you know it’ll need a significant amount of work, speak to your mortgage lender. They can show you what kinds of combined loans there are and how you can access them. You can also do this later on, when you’ve had your home for a while. Refinancing your mortgage isn’t usually very complicated, especially if you work with an experienced lender and you have good credit.

3. There Are Appraiser-Required and Borrower-Selected Repairs 

When you are buying or selling a home, you will need to have an appraiser value the property to determine whether it is worth what you’re paying. If the property is not in great shape, the appraiser might specify a list of things that need to be improved. These are meant to protect the buyer and make sure the home is habitable. For example, some appraiser-required repairs might include removing dangerous chemicals or repairing the foundation.

In contrast, borrower-selected repairs are not required by the appraiser or any outside party. Instead, they are carried out because the home buyer would like to improve the appearance or comfort of their house. These could include cosmetic renovations or projects meant to increase the home’s value. Some loans can be taken out for both of these types of repairs, but others are only suitable for the one or the other.

4. Jumbo Loans Are Suitable for Bigger Homes 

Single-family mortgages are restricted by a loan limit. In 2022, the maximum conforming loan limit in most areas of the US is $647,200. If you’d like a loan that is larger than this, for example because your home is more expensive or because your renovations are very pricey, you’ll need to take out a jumbo loan instead of a conforming loan. 

Many companies offering mortgage lending in Montgomery, TX prefer conforming loans because they are backed by the FHFA, which reduces the risk of the lender. Getting a jumbo loan can be trickier because your lender might apply stricter quality controls. However, most people with good credit and a high income won’t have any trouble getting their jumbo loan, especially if they have a large down payment worth 20-30% of the mortgage’s amount.

5. Loans Are Only a Good Idea If Ongoing Costs Decrease or the Property Value Increases

Sometimes, repairs are necessary to keep the property and its inhabitants safe. If there is an issue with your home’s foundations, HVAC system, electrical system, plumbing, or safety features, getting a renovation loan is crucial. However, there are several other good reasons for borrowing money for home improvements. Don’t hesitate to speak to your mortgage lender if you believe that you can significantly decrease your ongoing costs with a renovation. 

For example, double glazing the windows or installing solar panels could reduce your bills, which is more important than ever now that energy prices are so unstable. Another valid reason for taking on debt is to improve the condition and value of the property. Some changes, such as updating the bathroom and kitchen, can increase a property’s value by 10-20%. Such a renovation is well worth the cost of a home improvement loan.

6. Being Aware of Buyer Expectations Is Crucial 

When taking out renovation loans in Montgomery, always think about what you would like to do with your property in the future. Are you renovating because this will improve your quality of life or because you would like to sell your home for a high price? If the latter is the case, think about buyer expectations in your area. 

Renovating your house to an exceptionally high standard can be a good idea and increase its value, but only if it is located in an area with similarly updated homes. If you live in a neighborhood where properties aren’t as valuable, your home might become too expensive after the renovations. This could reduce the number of buyers you attract and make it more difficult for you to sell.

7. Your Interest Rate Depends on Multiple Factors 

Your mortgage lender will offer you several types of loans at various interest rates. So, how do they determine what kind of rate you get for your renovation loan? In fact, several factors come into play. Firstly, the state of the economy is important. At the moment, mortgage rates are higher than they were a few years ago because inflation has risen.

But personal factors are also crucial. People with a high credit score, those who can afford a larger down payment, and those who have a shorter loan term generally get better interest rates. The location of your home is also relevant because you’re likely to get a different deal depending on where your home is.

8. Local Mortgage Companies Are Almost Always Best

You can get a home renovation loan from various places, including large banks and financial institutions, but going with your local mortgage company is almost always best because they can offer you more personal advice. A professional like Gary will take the time to get to know your situation and offer you a loan that fits with your goals and your current financial situation.

If your property needs to be updated, you can get various kinds of renovation loans in Montgomery. Some of them are tied to your mortgage, while others are separate. Get in touch with us at Home Loans With Gary and Guaranteed Rate Affinity to find out more about mortgage lending in Montgomery, TX and to gain access to the money you need to update your property.