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When you’re planning a remodeling project or home renovation, it’s a good idea to start by determining how you’ll pay for it. Usually that comes down to taking out a loan or using your savings. Some people may have enough cash saved to consider paying for their remodeling project or home renovation out of pocket. But just because you have enough savings to pay for your home remodeling project doesn’t necessarily mean you should rule out either a home equity loan or a home equity line of credit (HELOC). Tapping into home equity can be a smart move, under certain circumstances. Your own individual financial situation will determine what payment plan you should choose. So check out this episode of Big Money Real Estate for my tips on when to tap into home equity and whether to choose a home equity loan or HELOC to pay for a home remodeling project. Be sure to subscribe to my YouTube channel for the latest real estate tips and news: http://www.youtube.com/subscription_center?add_user=expertrealestatetips And pick up my Intentional Investor Series on thinkglinkstore.com to learn everything you need to know to become a successful investor in real estate: http://thinkglinkstore.com/collections/frontpage/products/the-intentional-investor-complete-series Looking for more of my real estate and personal finance tips? Read my blog: http://thinkglink.com See my tweets: http://www.twitter.com/glink Follow me on Facebook: http://www.facebook.com/ilyceglink
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Many people are opting out of purchasing new homes to stay and renovate their current homes. There are ways to finance and get the cash you need to start renovating your home. Here's what you need to know. Good Morning Texas segment from 2.24.2016
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There is a huge misunderstanding out there about how to get renovation money when you purchase a new home. It would makes sense to most that you get the house, get the reno money and do the renos. However, this is exactly wrong.
Place yourself in the banks position. Say this was your money that you were loaning out to a friend. The friend says that they need the money to buy an old car that they are going to fix up. Once the repairs are done the car will be worth more and if they dont pay you back, you can have the car instead which will be worth the same amount.
Now what if you give your friend this money to fix the car with but then find out they just went on vacation to Hawaii instead. Worse yet, your friend decides not to pay you back. So now what are you going to do? Take the car that doesn't work properly and is worth less than the money you loaned out? The options are slim and this is exactly how the banks view it too.
Bad apples are out there destroying the trust for everyone else. I'm not saying that you are going to spend your renovation money on a vacation but the banks don't know this so they guard their money very closely.
So then, what does happen? What is the REAL sequence of events for getting purchase plus improvements money?
Here it is:
1. Find a home that you want and place an offer on it WITH Subject to Financing.
2. Figure out what renovations you want to get done.
3. Get a quote IN WRITING from a contractor on those repairs.
4. Submit your request for financing and renovation with the contractor quote to your lender.
5. Hope that the lender approves your file, remove the subjects from your offer, buy the home.
Now here is where people get a little mad at me.
6. On the date of closing you ONLY get your financing to PURCHASE the home. NO Renovation funds.
7. Pay for the renovations yourself up front using lines of credit, credit cards, family or find a nice contractor who will work on credit.
8. Prove the renovations are complete (photos, inspection, etc), submit receipts to lender for full amount of renovation funds
9. Lender approves your receipts and releases the funds to you.
Whew, quite the process.
Basically, what you need to understand is this. You don't get the renovation money until AFTER the renovations are complete.
Now, a few additional rules to be aware of. You must use ALL of the renovation money that you originally requested. If you get a quote for $10,000 for renos and the bank approves that amount but then you end up doing most of the renovations yourself and it only costs $5,000, tuff. You must do other improvements that will equal $10,000 before the bank will release ANY of the funds. You can't just do a couple thousand dollars at a time.
Another point is that you cannot request MORE than what you were originally approved for either. If using that same example, you were approved for $10,000 but your renovations ended up costing $15,000, you will still only get the $10,000 from your bank.
At the end of the day it is the banks money and they really like getting paid back so these are the loops they make you jump through.
Hopefully this gives you a brief overview of what to expect with your future hopes of buying an old "fixer-upper" and then renovating. The process sounds long but it all goes fairly quickly. The only thing to remember is that you need to make sure your quote is accurate for the renovations and that you can manage to pay for the construction yourself first before funds will be released to you.
If you have any questions or want to see how many renovation dollars you can get for your next purchase, give me a call, 604.313.9996 or email, email@example.com and I can give you an idea right over the phone.