Preparing Financially to Remodel Your Home

You bought your dream home and it's perfect. Well, it's mostly perfect. The kitchen is old, beat up and in desperate need of an upgrade, so you decide a renovation is in order. You've chosen the perfect tile, countertops and appliances; but you still need to make the most important decision of the entire process - how are you going to pay for the remodel?

In the past, the most common way to fund a remodel project was to take out a home equity line of credit. These days, there are dozens of options for homeowners looking to spruce up their surroundings, even those with limited or no home equity. A wide variety of loan options means there's something for every homeowner, but it can be confusing to sift through all the competing lenders, options and terms. Knowing the answers to the following questions can help simplify the loan shopping process and get your remodel off to a great start.

How much money do you need?

If you're hiring a contractor, have a firm bid in hand, then add on 10% for any surprises that might come up. If you'll be doing the work yourself, make a detailed list of materials, quantities and costs. Be sure to include any permit fees or equipment rentals. It's best to add a cushion of 20% to 30% to be safe.

How much money can you get?

Similar to a mortgage, your credit rating and income are big factors in how much money-lenders will give you. Lenders will often use the loan-to-value (LTV) ratio, a percentage of the appraisal value of your home to determine your loan amount. Your LTV and debt-to-income ratio determine how much you can borrow and the monthly payment for which you qualify.

How long do you plan to take to pay off the loan?

The longer the loan term, the lower your monthly payment will be, but your total interest will be much higher. If you can afford the higher monthly payment a 15-year loan will save you money in the long run.

Deciding on a home renovation loan can be an overwhelming process. A trusted loan officer will ensure you have all the options laid out, so you can make the right choice to finance your home renovation project.

Citywide Home Loans & CHL mortgage make the loan process simple. Visit www.citywidehomeloans.com to see how much home you can afford and find a loan program that's right for you.