what if I pay for house in full when I sell my home, but need money for the renovation

We previously paid off our mortgage, so when we sell our current home we will have money to invest in a new home. If we pay for the new house in full from the proceeds of our current homes sale, can we get a loan to pay for all the renovations on the new home. If so,what is the process.

2 Answers

Your best bet if that's the route you wanted to go would be to take out a home equity line once you've bought the home and use it to fund the renovations. Another alternative to consider would be saving the funds you need for the improvements at the time of the purchase, and getting a mortgage then for the amount needed. The home equity line might cost a little less to secure, and would be a line of credit you could draw on as needed, but would also be a floating rate that varies with prime, rather than a mortgage which could be a fixed rate.

Ted makes a good point here. First, consider how much you will need for the renovation and how long it would realistically take to pay it back.

If you are looking at less than 10K, then consider a home equity line of credit (HELOC) or using a low interest rate credit card and then paying it off as soon as realistically possible.

If you are looking at renovation costs at $20k or higher then I would consider getting a fixed rate mortgage. The interest rate will be much lower and it will be fixed. Though the upfront closing costs may be a little higher. I would only finance what you need plus maybe 5 - 10% for cost increases/upgrades and only do a 15 year or less mortgage.