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HELOCS are similar to credit cards. You can draw any amount, at any time, up to your limit. You’re allowed to pay it down or off at will. HELOCs have two phases. During the draw period, you use the line of credit all you want, and your minimum payment may cover just the interest due.

At this point, you can no longer draw funds and the loan becomes fully amortized for its remaining years. Pros: Borrow as much or as little as you need — when you need it Low monthly payments during the draw period Low closing costs Cons: Variable interest rates rise in tandem with the Federal Reserve’s prime rate Monthly payments can skyrocket once the repayment phase begins — i.

Only homeowners with little or no equity have a good reason to opt for these loans, so we’ll focus on the unsecured type. You don’t put up collateral for an unsecured personal loan, so you don’t risk losing your home or car in the event of default. Otherwise, the main advantages are the relative speed and simplicity of the application and approval processes when compared with mortgage refinances, home equity loans, and HELOCs.

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Pros: No home equity required No appraisal required (great if your home is in disrepair) Application process is faster and simpler than for other renovation financing Cons: Higher interest rates, especially for those with lower credit scores Loan limits are up to $100,000, so may not cover all projects These are revolving lines of credit that allow you to borrow what you need, when you need it, up to the credit limit.

Although they offer more flexibility than personal loans, personal credit lines have the same drawbacks as personal loans — and then some (replace your shower). Almost all credit lines have variable interest rates, and if the rate is raised, it can be applied to your existing balance — something credit card companies are not allowed to do.

If you’re not careful, a once-affordable loan balance could become hard to repay. As of October 2017, credit cards have an average APR of 16. 7%, with some charging up to 22. 99% on purchase balances. Assuming you don’t pay the entire balance within 30 days, credit cards can be one of the costliest home renovation financing methods.

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Get a new card with an introductory zero-percent APR (the intro period is typically 12 months), use the card to pay for the improvements, and repay the entire balance before the interest rate kicks in. Pros: Near-instant access to cash Speedy and simple application process (for a new card) Interest-free loan if you find a card with an introductory offer and pay off the balance within a certain timeframe Cons: High interest rates (especially for cash advances) Low minimum monthly payments can encourage overspending Loans are typically limited to four-figure sums.

A 203k loan allows you to borrow money, using only one loan, for both the home purchase (or refinance) and home improvements. 203k refinance Most homeowners don’t know that the 203k loan The new loan amount can be up to 97. 75% of the after-improved value of the home. For instance, your home is worth $200,000 as-is.

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Your refinance loan amount is not limited to your current value. Rather, you could get a loan up to $224,825 (97. 75% of future value). Use the difference between your existing balance and new loan amount for home improvements (after you pay for closing costs and certain 203k fees). bathroom renovation Arizona. If you’re in the market to buy a fixer, a 203k can help you purchase and repair a home with one loan.

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They come with high interest rates, short repayment terms and a balloon payment. 203k loans, rather, are designed to encourage buyers to rehabilitate deteriorated housing and get it off the market. Because 203k loans are guaranteed by the FHA, it’s easier to get approved, even with a credit score as low as 580.

5 percent. But these relaxed financial standards are offset by strict guidelines for the property. The house must be a primary residence and the renovations can’t include anything the FHA defines as a “luxury.” A list of improvements that borrowers may make can be found here. Fannie Mae offers a similar home purchase and renovation loan — the Fannie Mae HomeStyle® program — with relaxed home improvement guidelines, but stricter down payment and credit score criteria.