Some institutions will allow you to borrow against the anticipated equity in your home once your remodeling project is complete. If you are planning a fairly large project or do not have a lot of equity in your home this will give you more flexibility and allow you to include all the things you’re hoping to.
When deciding how much to borrow, you’ll want to consider how long you plan to stay in the house and how much return you’ll get on your investment when you sell. The amount you want to borrow will impact the scope of the project you decide to undertake. Return on investment depends on the house, neighborhood, type and quality of the improvements. Some improvements bring a higher return than others such as kitchens, bathrooms and family room additions. Naturally the longer you stay in your home the more you’ll recoup when you sell.
Once you’ve decided how much you’re comfortable with borrowing check with a bank to see if you will be approved for that amount based on the equity you have in your home, the appraised value of the home (with or without the improvements), and your income. Research various sources of funding to compare individual qualification guidelines, interest rates, terms and tax considerations. A professional remodeling contractor is familiar with financing options available and can help.
Livability issues have to be weighed along with return on investment. Don’t deprive yourself of that soaking tub you’ve always wanted just because you won’t see 90% return if you sold tomorrow.
The FHA has loans specifically for home improvements. They are widely available, however they require the contractor be approved by the lender.
Homeowners are often concerned that their improvements will price their home out of the market. This should be considered, however it needs to be weighed against livability factors for the time you plan to remain in the home.