Financing
Your
Renovation Project
AS
WITH any major purchase, you need
to have a plan, you need to know your
needs, and you need to understand your responsibilities and
your options.
YOUR
HOME renovation project is very important, not only for
your own enjoyment of your
home but also because it is recognized universally as good business
for increasing the
resale value of your home.
IN FACT, you may spend more money
on a typical remodeling project than you would
buying a car. But most homeowners do even less shopping around
for a contractor and less homework on their home improvement
financing options than they do when they buy a car. As with
any major purchase, you need to have a plan, you need to know
your needs, and you need to understand your responsibilities
and your options.
TO OBTAIN FINANCING for your remodeling
project, you may want to consider a bank loan. You should investigate
the different programs banks offer, including interest rates
and terms. There may also be important tax considerations that
could affect your home improvement budget. For example, some
renovation projects may be tax deductible.
START WITH a project budget
and review it with every step. Since most home remodeling jobs
involve hundreds of details, there are hundreds of opportunities
for increased cost. Your budget can be destroyed if these costs
get out of hand. You may not be able to plan for and control
every cost change, but you can set a realistic budget, with
contingencies, and work to keep the project within the budget.
SOME
ITEMS to include in the budget are design work, permits,
additional living expenses if remodeling requires you to move
out, specialty items such as appliances, utility hookups, lighting
fixtures, loan fees and special insurance, and a contingency
of at least 15 percent of the total cost (for a smaller job
or a more complicated project, this amount may need to be higher
or lower.
NOW
THAT YOU have a better idea what improvements you'll
make, a reasonable timetable and a budget in mind, you can approach
a bank to request financing. If you know what the banker will
need from you to reach a decision on your loan request, and
you've prepared in
advance, this can be a relatively painless process.
YOU
MAY NEED to provide the following to the bank:
-
The
loan application completed by each prospective borrower, or
owner of the property to be improved.
-
A
copy of the first mortgage or Deed of Trust.
-
A
copy of the annual mortgage information latter with escrow
information and address of mortgage company.
IT
IS IMPORTANT to know that you must not begin any work on
your home, including delivery of materials, until your loan is granted
and the liens are filed. Your bank officer will advise you when
work may commence.
THE
BANK will review your credit history and will also need to
approve the property value through an appraisal. The bank will also
have to approve the contractor you have selected.
This involves more than just asking former customers for references
on the contractor. The bank will need to review the contractor's
financial statement and also consider the contractor's track record
on completing this kind of project. If your contractor is already
on the bank's approved list, no additional information need be submitted.
YOU
NEED to know that the contractor you select is your decision.
Bank approval does not remove your responsibility to carefully select
a contractor, nor does bank approval obligate the bank if the contractor
fails to complete work on your home. You can help smooth this process
if you explain to your contractor what the bank needs and the importance
of providing complete information.
REMEMBER
THAT your bank will review your contract to protect its own
interest. You would be wise to have an attorney review it for you
also. The legal fees associated with this are minimal compared to
the heartache you may endure from a project gone bad.
Article:
Home & Condo Designs , 2000
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