So, you finally bought that 19th-century farm house you've always dreamed of living in. The problem is, you don't have enough money to fix it up. If you have good credit, it's easy to get a mortgage for the value of your home or even a little more. However, a renovation can cost more than the property was worth when you bought it.
The first thing you can do is look at what you have. If your house is worth enough, you can get a loan against it. Use your credit cards or borrow money from your parents for short-term home repairs. These ideas will only work for short-term repairs. Once the repairs are done, you should be able to refinance your home and pay off your relatives, high-interest credit cards, and home equity loan by rolling them into your mortgage.
You might be able to get a "line of credit." It's usually easy to get a line of credit for up to $30,000 without much work and with only a small amount of paperwork. Lines of credit are good for short-term home improvements that cost less than $100,000. The interest rates tend to be high, but you can take out money as you need it and only pay interest on the money you've taken out. Once the renovation is done, you can refinance, pay off the line of credit, and combine all your loans into one mortgage.
Depending on how big your project is, you might be able to get store loans or credit card offers. Many home stores now have their own credit cards and offer deals like interest-free credit for a year. You may be able to negotiate a longer term. The important thing is to pay off the loan or credit card before the interest-free period ends. If you don't, the interest will go back to where it was when you bought the item. Some stores will also give you a loan to build your project without charging you interest. The terms of these loans vary from store to store. Like credit card deals, these usually have a time limit that you need to pay attention to. Again, when the renovations are done, you can refinance and pay off the loan, so you don't have to pay high interest.
Most of the time, construction loans are used for bigger projects. This type of loan is short-term, so you can take out money as you need it and pay interest on the money you've taken out. Almost everyone now offers construction loans, which has made these loans less expensive. The nice thing about construction loans is that you can take out money as you need it. Once the renovations are done, you can refinance and only have one closing and one mortgage. When looking for a construction loan, you should keep in mind the fees and interest rates, and you should always read the fine print for hidden fees.
