Making improvements to a home might have an upfront fee, but it can be an incredibly smart way to sell a home for more money, get a property for the best value, or increase equity. As a real estate agent, it’s important to share with clients the pros, cons, and strategies for renovating or making small improvements to houses. This knowledge can help you help clients make smart decisions when buying, selling, or improving a property.
There are many ways to get funds for home improvements, so I’ve gathered the six best home improvement loans for you to use or recommend to clients:
- Figure HELOC: Best for real estate investors
- Renofi: Best for major renovations
- SoFi: Best for homeowners with limited equity
- Fannie Mae HomeStyle® Renovation Loan: Best for financing a home purchase and renovation in one
- Discover home loan: Best fixed-rate loan with no additional fees
- Aven HELOC: Most flexible, credit card-style access to home equity
The Close’s top picks for best home improvement loans
 | |||
 | |||
 | |||
 | |||
 | |||
 | |||
Figure HELOC: Best for investors
|
|
|---|---|
Pros
| Cons
|
Terms
|
|
According to Home Equity Lending News, Figure is the #1 non-bank HELOC (home equity line of credit) in the country. It allows you to take up to $400,000 in home equity with a fixed interest rate, which means you will have predictable monthly payments. Plus, it’s one of the only types of home improvement lenders that will finance a variety of property types, including secondary homes and investment properties.
While your specific interest rate and the amount you can borrow depend on your creditworthiness, debt-to-income (DTI) ratio, and equity, Figure’s interest rates can be lower than most other options. Given these, it has one of the best home renovation loans for homeowners and real estate investors wanting financing for large rehabs.
📖Helpful resource: How to Invest in Real Estate: A Beginner’s Guide
Renofi: Best for large loans and major renovations
|
|
|---|---|
Pros
| Cons
|
Terms
|
|
RenoFi stands out as one of the best home remodeling loans because of its high potential loan amount of up to $750,000. Even though this loan is a HELOC, the amount you can borrow isn’t based solely on the amount of equity you have in your home. Instead, the RenoFi home remodel loan is based on your home’s ARV (after repair value), and you can finance up to 90% of that value! For this reason, RenoFi is the best choice for those wanting to do big projects and major renovations.
SoFi: Best for homeowners with limited equity
|
|
|---|---|
Pros
| Cons
|
Terms
|
|
The SoFi home improvement loan is an unsecured personal loan, which means that it does not use your home as collateral. This is ideal for those who don’t have sufficient equity in their home for home equity loans or lines of credit. Since it is an online company, you can get funding the same day you apply. Plus, checking your rate and eligibility doesn’t impact your credit score, so it’s a great option as you look further into the top home improvement loans.
On the other hand, the maximum loan amount from a SoFi personal loan is only $100,000. Plus, the interest rates for personal loans are generally higher than interest rates for home equity loans. This means that the SoFi loan wouldn’t be the best choice of funding for a fix and flip project or a huge renovation — but it could be the perfect solution for smaller home upgrades.
Need financing for a fix and flip project? Check The Close’s roundup of the best fix and flip loans for some vetted options.
Fannie Mae HomeStyle® Renovation Loan: Best combined purchase & renovation
|
|
|---|---|
Pros
| Cons
|
Terms
|
|
The Fannie Mae renovation loan is unique because it can be used to refinance an existing home or as the financing for a new property. The loan covers up to 75% of the purchase price of the home and the renovation costs, and the terms are similar to a typical mortgage of 15 or 30 years.
While the process of getting this loan is more involved than other options on our list, this could be an ideal strategy for those who are planning to make improvements that significantly increase the value of their home. It’s undoubtedly the best loan for home improvements with a long-term timeline.
Discover Home Remodel Loan: Best fixed-rate loan with no fees
|
|
|---|---|
Pros
| Cons
|
Terms
|
|
The Discover home remodel loan is actually an unsecured personal loan. It’s similar to the SoFi home remodel loan, which means that it does not use your home as collateral, offers a predictable, fixed interest rate, and doesn’t slap on additional fees for taking out or paying off the loan.
Its home loan has a lower maximum amount, but also has a lower starting interest rate. If you are looking to do a few small improvements without going through a complicated loan process, Discover might be the best home improvement loan for you.
Aven: Most flexible access to home equity
|
|
|---|---|
Pros
| Cons
|
Terms
|
|
Aven is an online lender with a HELOC option that comes in the form of a Visa credit card. It even offers 2% cashback on your purchases. Like some of the other online financing options, the application process is extremely quick and easy, so you could have your Aven credit card in about a week.
There are no upfront fees or penalties for paying off the card. If you’re planning on making mid-sized or large home improvements, Aven is the fastest, most user-friendly way to leverage your equity.
Methodology: How we evaluated the best home improvement loans
At The Close, our highest priority is giving real estate professionals accurate, objective information to make smart choices and grow a successful real estate business. We do this by working as a team of real estate professionals, researchers, writers, and real estate experts to thoroughly research every topic and organize it by what’s most important for agents.
To help you find and choose the best home renovation loans, we carefully evaluated a wide range of financing options. Our detailed criteria for home improvement loans includes:
- Type of financing: We selected multiple types of financing that were most fitting for the needs of homeowners, investors, or homebuyers who want to make home improvements.
- Fees & interest rates: We looked for the best home improvement loans with low interest rate options, keeping in mind that the type of financing and the applicant’s credit score will directly impact the interest rate.
- Qualification criteria: Many people who want to do home improvements do not have incredibly high credit scores or a large amount of equity in their home, so we searched for loan options with reasonable eligibility requirements.
- Repayment options: Home renovations can range from a few thousand dollars to a few hundred thousand dollars, so we looked for home improvement loans that made various improvements more achievable.
- Reputation & customer reviews: We looked at each brand’s third-party reviews and prioritized loan options with many high ratings.
- National availability: Not all home improvement lenders are available across the country, but we selected companies with the widest range of availability.
How to choose the best home improvement loan
In order to choose the best home renovation loan, you need to have a clear understanding of your finances, the cost of your project, the timeline of your remodel, and your financing options. The right home renovation loan for you should fit your finances and the timeline of your project.
Here’s a general guide on when it’s best to use each different type of home renovation loan:
| Home equity loan | A lump sum based on the equity of your home. You only pay interest on the amount of money that you use. |
|
| HELOC | A line of credit based on the equity of your home. You only pay interest on the amount of money that you use. |
|
| Cash-out refinance | Replaces your existing mortgage with a new one at a higher amount, and you receive the difference in cash. |
|
| Unsecured personal loan | Unsecured means you won’t use your home as collateral. Typically faster and easier to get than HELOCs, but have a higher interest rate and shorter repayment periods. |
|
| Credit cards | There are credit cards that offer a 0% interest rate for a short time. This can be enough to finance and pay off a few home improvements. |
|
| Hard money loans | Usually have a higher interest rate and a short repayment time, these can be great for investments and small to mid-sized projects. Typically offered by private, non-bank lenders who can give you funding upfront. |
|
Frequently asked questions (FAQs)
Is it a good idea to take out loans for home improvements?
Every financial decision should be made by considering the specific situation. Taking out a loan to make home improvements can be a smart, profitable decision that increases the value of your home or makes an affordable property fit your needs. However, it’s only a smart decision if you can afford additional payments and interest.
Is it hard to get approved for a home improvement loan?
In general, home equity loans or HELOCs require you to have a significant amount of equity in your home. On the other hand, personal loans often judge your eligibility by your income, credit score, and debt-to-income ratio. As long as you can prove that you can afford the payment, it’s not extremely difficult to get approved for a home renovation loan.
What type of loan is best for home improvements?
The most common type of loans for home improvements are home equity loans or lines of credit and personal loans. These loans are often set up in a way that makes it easy to get enough money and get lower interest rates than other options, like credit cards.
How do I get a home improvement loan?
The specific steps to getting a home improvement loan will vary — but in general, it follows this process:
- Evaluate which type of loan is best for you.
- Gather required documentation about your property, income, debt, and credit history.
- Apply for funding with a lender and submit the required documents.
- View your rates and financing options.
- Finalize funding and receive it as a lump sum, line of credit, or new mortgage payment.
Add comment