Starting a home improvement project is both exciting and stressful. The Lake Region Bank lending team is here to help take the stress out of financing your project so you can focus on more enjoyable steps, such as designing your new space and choosing your décor. Here’s a look at the steps in planning the finances of your home improvement project and how we can help.
Set a Realistic Budget
The first step in planning your financing for your home improvement project is to set a realistic budget. Your budget is your guardrail against overspending and spending beyond your means.
First, set an overall budget for your entire project. Then, break down the costs of your project into categories, just as materials, labor, permits, and unexpected expenses. Experts recommend allocating 10 to 20 percent for surprises such as structural issues, material price increases, or changes in the scope of your project.
It will be helpful to have your budget with you when you apply for financing at Lake Region Bank as well as when you’re speaking with contractors and other vendors.
Evaluate Your Funding Options
Lake Region Bank has a number of lending options that can help you finance your home improvement project.
Minnesota Housing Fix-Up Fund
The Minnesota Housing Fix-Up Fund is an affordable, statewide loan program available to Minnesota homeowners through Lake Region Bank. The program offers fixed-rate loans that can be used on a wide variety of projects, from remodeling and repairs to energy efficiency improvements and accessibility retrofits.
Cash-Out Refinance
A cash-out refinance pays off your first mortgage and uses the equity you’ve built in your home to write a new home loan. This loan includes cash for improvements in addition to the mortgage loan. Speak with your Lake Region Bank loan officer to learn more about this product and whether it is the right fit for you.
Home Equity or Home Improvement Loan
A home equity line of credit (HELOC) or home improvement loan are two more options for financing your home improvement project. A HELOC is a first or second mortgage on your home with its own payment schedule and variable interest rate. The amount you can borrow is dependent on the amount of equity you have in your home, among other factors. A home improvement loan is also a separate product with its own payment schedule and fixed or variable interest rate. Our friendly experts can help you understand these options and which one is right for you.
Assess Your ROI
If you’re planning to sell your home in the next few years, be sure to evaluate your return on investment, or ROI, for your project. Focus on improvements that add value, such as a modest kitchen or bathroom remodel and energy-efficient improvements. This will help you maximize the amount you borrow and avoid spending more than you’ll get back in the sale of your home.
Other factors to consider when assessing your ROI are the tax implications of your project. Some improvements, such as upgrades to your home’s HVAC system or adding solar panels, may qualify for tax credits. These credits can lower the overall cost of your project, even if they do not lower the amount you need to borrow. Speak with your tax advisor for more information on tax credits and how they affect your financial picture.
Can’t wait to get started on your new addition or renovation? Let’s get in touch! Your Lake Region Bank lending team is looking forward to speaking with you. Contact us at (320) 235-5900 or fill out our interest form.
