Is it wise to get a loan to renovate the house? The truth is that there is no one-size-fits all answer to this question. On the one hand, there is a common perception among people that bank loans for renovation projects are a bad idea primarily because loans, in nature, are discouraged unless necessary. However, there is another way to look at the situation that may ultimately justify applying for a bank loan to renovate a house.
It all begins with analyzing your goals for renovating the house. Bad loans come about when you want to renovate the house out of a whim and without a sound plan on how to go about doing it. In many cases, homeowners start with just a few thousand dollars in expected expense only to end up with tens of thousands when all is said and done. If they take that financing from a loan, chances are that they’ll have a hard time paying off the loan and will eventually have to sell the house to settle the debt.
Sound loans are properly planned. First, you need to know how much you need and how much you want to take out as a loan. Second, you need to compare your options so you get favorable deals on a variety of loan options. Lower interest loans for the same term are always better than higher interest loans but the tenure of the loan also heavily influences the interest rate so doing your homework is certainly required. Third, you need to have a proper plan for doing the renovation if you want to make sure that the money will be enough. Don’t ask your contractor to build a swimming pool in the backyard if you are on a limited budget and you have no leeway to overspend.
As a last note, getting a loan to renovate a house may also be sound if you ultimately want to sell the house for a fair market price. Old and creaking houses don’t sell at competitive prices; brand-new, well-designed houses do. You may want to consider this if you know that the ultimate return for the house is bigger than the loan amount.
Think about these things first before jumping to a loan for a renovation job.
