As a result of the Covid-19 pandemic, billions of people worldwide are at their homes waiting for all of this to be over.
And trust me, it will.
As you have landed on this blog post, the chances are that you might be looking forward to improving your home, whether it's upgrading your HVAC, expanding your home office, adding in a swimming pool, or maybe something else.
But the thing is, as a result of the Covid-19 pandemic, various lenders, banks as well as fin-tech companies have already made changes to the way that they lend money to people.
And if you are looking for financing, you might be exploring the options that you can choose from.
When the Covid-19 outbreak first began, various lenders pulled back on the Home Equity Lines of Credit & Cash-Out Refinances. Some tightened their approval criteria. Whereas, some halted the new applications.
In this blog post, we'll be taking a brief look at the different homeowner financing options during the Covid-19 pandemic. In addition, we will take a look at the pros and cons of each of them.
Let’s dive in.
Listed below are the four financing options we’ll be taking a look at:
Let’s begin with the first.
Cash-Out Refinance is one of the homeowner financing options you can go with during the Covid-19 pandemic.
So, what’s this option all about?
How does it work?
Cash-out refinance is all about replacing your already-existing mortgage with a new one for more than what you owe on your house.
You will get the difference in cash, which you will be able to spend on your home improvement project.
The cash-out amount is based on your credit and equity in your home. Hence, you have to own your house and have built-up equity to qualify for this homeowner financing option.
|Less interest to be paid: The rates are lower than the HELOCs and unsecured products.||It’s not an option for renters as they aren’t eligible for this financing option.|
|The payments are simplified and predictable.||The appraisal and underwriting process may lead to the entire process taking weeks until you get the money.|
|Tax deduction of interest opportunities.||It's not great for homeowners who are worried about foreclosure risk.|
As a result of the Covid-19 pandemic, various lenders have already tightened their mortgage requirements.
It's an affordable and fixed-rate financing option to finance your home improvement project. However, if you are looking for immediate financing, this option might not be suitable.
Consider it similar to a credit card.
This means you will be able to borrow as much money as you'd like up to your credit line limit. You can borrow it whenever you like. Once you pay down your balance, you will be able to borrow more again.
The credit line will be based on your credit as well as equity in your home. Hence, you must own your home and have some built-up equity.
|This option is great for projects with continuous ongoing expenses. You can spend it whenever you like.||If you are a renter, you won't be eligible for this option.|
|Tax deduction opportunities.||If you are looking for immediate funding, this option isn't a good fit. Most banks halted the new HELOC applications, as a result of the Covid-19 pandemic.|
|Lower interest rates than unsecured products. It's quite popular due to its revolving nature, as you can borrow whenever you want.||It's not a good option for homeowners who are at foreclosure risk.|
It’s one of the flexible and most affordable homeowner financing options that you can opt for during the Covid-19 pandemic. However, if you are looking for immediate financing, this option won’t be a good fit for you.
Aren’t we all familiar with traditional credit cards?
You can spend as much as you want to until you have maxed out your credit limit.
In order to spend more, you can pay your outstanding balance. Credit cards are accepted almost everywhere. Some offer cash options, as well.
|Fast funding.||Higher interest rates.|
|This option is great for projects with continuous ongoing expenses. You can spend whenever you like.||Rates are variable and can even rise.|
|Promotional rates will save you some amount in interest, upon repaying quickly.||People end up overspending and running up debt that’s unmanageable.|
Traditional cards are a good option, yet expensive.
This homeowner financing option is fast and flexible comparatively, and if you are looking for immediate funding during the Covid-19 pandemic, this option is preferable to go with.
Personal loans are nothing but unsecured loans. Once approved, you will receive a lump sum of cash, which you can use, as per your requirements. The rates and the terms are usually fixed. This means you will be able to pay back the loans over a specific period of time in set installments.
|The approval process is quick and takes place online.||It's not a good homeowner financing option for projects with an unclear scope and ongoing expenses.|
|It’s a great option if you are a renter or a homeowner who’s worried about foreclosure.||Regardless of how much you end up spending, you will have to pay interest on the outstanding balance.|
|It's a great option for projects with a fixed scope of work.||Rates are usually higher than the unsecured options.|
If you are looking for a quick and affordable financing option, personal loans might be a good fit for you.
Covid-19 is looming upon us, and there's no end date in sight.
Let’s just admit it. You can’t delay your home improvement project for like maybe a year or two.
Times are tough, and receiving financing might be complicated right now.
And that’s what we are here to help you with.