mike.parsons

Buying your own property is one of the most exciting things you could do; however, there is one even more exciting experience than that – building your dream house, just the way you wanted and always imagined it. However, this is very likely also the most expensive endeavor of a person’s entire life, which means that financial planning of each and every step is of the essence. Regardless of whether you are starting from scratch or you want to overhaul your existing home to suit your needs better, you have to look into financing options that will not leave you house poor.

Even simply buying a home involves a very long list of expenses, but building or renovating one will be an even more complex matter. However, this option also boasts advantages such as the opportunity to customize the entire space, the option to make it as energy-efficient as possible from the ground up, as well as the mere fact that you will be living in a new property that is less prone to needing repairs. So, here is what you need to know, finance-wise.

Check where you’re standing

Long before you even start the process of building or renovating, what you should not miss doing is checking your credit score. If you do this early enough, you will even have time to improve it if necessary. Six months is a good time to start; pay off any other debt you might have, see if you have any unpaid bills or late payments, etc. A good credit score is especially important for home construction and renovation loans so it’s worth waiting a little longer if that would improve your situation. Once this is sorted out, your credit score will allow you to get better loan options.
Moreover, planning a budget will be necessary. In order to go on to the next step, you need to know about how much your project will cost (lenders will look for this information), as well as how much you might have already saved up for such purposes. Don’t forget to include 10-20% of the price for unforeseen circumstances. You can seek the help of a professional in both this and the next decision that is to be discussed.

Financing options

When it comes to financing your project, you can look into several options to find the one that will best fit your needs.

Home construction loan

As the name suggests, of course, if you’re building from scratch, a home construction loan might be a good choice. These are short-term loans. Here, you have several further options, the two main types of construction loans being construction-to-permanent loans and construction-only loans. The former type gets converted to a mortgage once your property is up and standing. While its rates might fluctuate, the advantage of this option is that you only pay fees such as closing costs once – as opposed to the latter option which can cost you due to having to take out the mortgage separately after the construction is finished.

Home renovation loan

Most often, the simpler solution is to renovate an existing property (or your own old home) than to completely relocate or knock the whole thing down to the ground. In that case, a reliable home renovation loan could cover you. If you do your research well, you can find lenders with flexible loan terms who reward good credit history owners with low rates and you will be one step closer to your dream home.

Mortgage refinance

Another way to finance a renovation project can be mortgage refinance. With this, you might have the chance to lower your current interest rates. This would, of course, create some extra money that could work as your renovation budget. However, refinancing can come with a slew of fees if you’re not careful, so make sure you’re well-informed before jumping right in.

Other considerations

First of all, whichever financing option you choose, make sure you properly do your research beforehand. Moreover, more often than not, it is well-worth turning to a professional (such as a mortgage broker) to get the best deals. Finally, if you are considering making your living space eco-friendly, you should be aware that depending on where you live, you might be eligible for favorable interest rates or even tax incentives.

Building or renovating a home is a huge project where you cannot afford to overlook any financial aspect or it might cost you in the long run. However, it is also a very rewarding project well worth the trouble.