Renovation Loan or Hard Money Loan for Rehab w/ 100% Equity?

5 Replies

I own a home free and clear but need to do renovations to it before selling it. It is not homesteaded under me b/c I just acquired it and cannot homestead (from what I've been told) til Jan 1st. I want to get it on the market renovated around that time so I don't want to wait for a HELOC or HEL which I believe requires homesteading the house. If I want to get a loan now for renovations (say $20k give or take) without waiting forever, would a renovation loan of some sort or a hard money loan be my best option without paying ridiculous interest rates or tons of fees???? I have good credit so that's not an issue but i'm self employed so taxes show lower income. I have low debt to income though. I owe like $4k for a student loan and that's about it. Monthly payment requirement on that is like $32. Also, I don't want to pay back the loan until I sell the house after the renovation so timeline is like a month or month and a half for renovation then how ever long it takes to sell after the new year. In my area, people are looking for 3 bedrooms under $200k so I don't expect after renovation that it is on the market long.

Updated 7 months ago

Talked to a credit union loan officer today that said I could possibly get a HEL since the house is a homestead (under my father who passed recently). I sent them proof that I am the new owner of the home and if the deed I sent will suffice, I may be able to start the loan process now instead of waiting til the new year.

Hard money is not going to be a good choice for you due to the loan size. Most hard money lenders have minimum loan sizes starting around 75,000. I would go to a credit union and see if you can get a personal line of credit or a quick lien against the home as far as a 1st mortgage, for the money you need for the renovation?

If that don't work, maybe a credit card? By the time you were to have factored the fees from a hard money and the rates, it would be close to credit card rates anyway? Private money is another choice, do you have a friend that can make the loan and place the lien?

@Kevin R. Thank you. I keep no balance on my 3 credit cards b/c the rate is like 24%. I could apply for a 0% APR new card which is looking like that is what i might do, but they usually only start new customers with like $3k before gradually increasing it. I may have a friend. That may be my only option without having to move in, homestead, wait for loan, wait for renovation, wait forever to sell :/. I'm trying to move out of town so I'm not wanting this to drag on but I appreciate your reply.

@Shirley McLean

Many banks or credit unions will do unsecured loans, similar to a credit card in that you don't need collateral to qualify and the interest rates are not bad. Loan amounts vary between lenders so you would have to do some research. 

Otherwise a family or friend is a good option. Best of luck. 

@Jonathan Pflueger I called a credit union (i joined recently) and asked about a personal line of credit which is what you are speaking of I believe. The loan officer said I may still be able to get a Home Equity Loan without waiting til the new year to apply (after homesteading it in my name). I sent him what he needed to verify so now I am just waiting. I'm assuming a loan is better than a personal line of credit b/c the line of credit may lower my credit score more and have higher rates. Thank you.

@Shirley McLean I also recommend a small personal loan or credit card for such a small loan amount, unless you can get the HELOC. Most lenders are not going to offer mortgages for $20,000, and even if you found one, the fees would be high compared to the loan amount. Home Depot and Lowes offer project loans to buy materials, and even many contractors will finance projects, although they tend to be a bit more expensive.

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