This is a comprehensive guide to help you understand the different garage financing options that you can take advantage of. All of us know how expensive it can be to build your garage or remodel your existing garage. The cost is one of the biggest reasons why many homeowners search for garage financing options. But there are too many garage financing options out there, so how do you figure out the best one for yourself? And with so many options easily available, it’s easy to get overwhelmed and make the wrong choice.
In this guide, we’ll help you find the best garage remodel financing options that you should consider. Let’s dive in.
Best Garage Remodel Financing Options
It can be a huge hassle trying to find the best garage remodeling financing options, especially if you don’t know what you’re searching for. But your process of choosing the financing options doesn’t have to go this way. We did the research on your behalf, and we made sure to pick the best options.
1. A Home Equity Loan or Line of Credit (HELOC)
In most cases, a Home Equity Loan or Line of Credit (HELOC) is the best choice for most homeowners who are looking to financing a renovation project. Regardless of the type of renovation, you’re looking forward to doing, be it kitchen remodel, bathroom remodel or anything else, this is a great option.
Although, this type of loan takes up too much time to build up the equity that’s needed to pay for these projects, especially for the more expensive projects. In some cases, it can take up to 10 years to build up a 100K equity.
A home equity or line of credit is great for homeowners who have this type of equity available. Those who don’t have this type of equity have to be forced to look for alternatives. Those improvements and additions to the property will undoubtedly increase the value, but there’s not yet sufficient equity available to tap into.
Even if you’ve got the available equity to finance the project, what will happen the next time you need a HELOC?
2. A Cash-Out Refinance
Similar to home equity loans, a lot of homeowners choose a cashout to refinance options for remodeling or paying for a new garage. For some homeowners, it means that they’re forced to refinance into a higher rate, which basically increases the monthly payments and increases the closing costs, that are given based on the total loan amount.
The exception to this is when refinancing reduces your interest rate which ultimately increases your monthly payments. It’s important to consider all of your options and understand which will get you the money needed for remodeling at the lowest possible interest rate.
3. A Construction Loan
Construction loans are usually used for ground-up construction of a home, but can also be used to finance a garage remodel project. This also covers building and remodeling your garage.
These loans are also a good option as they let you borrow based on your home’s renovation value, which makes them an ideal option for those who can’t use equity. Here are the 3 reasons why a construction loan isn’t the best option for you:
- You’re forced to refinance, potentially into a higher rate that increases your monthly payments.
- You’ll end up paying higher closing costs on your loan amount that includes mortgage plus renovation costs. These can add up to being pretty expensive.
- A complicated process that won’t get you the money right away and that many contractors hate working with this type of loan.
If you’re planning to get a construction loan to finance your garage, then be prepared for higher monthly payments and closing costs.
4. FHA 203K or Fannie Mae HomeStyle Loan
Similar to construction loans, FHA 203K Loans, and Fannie Mae HomeStyle Loans, let you borrow based on the future value of your home. This makes them a great choice for some homeowners for financing any and all types of renovation projects.
These government-backed renovation mortgages allow you to finance the purchase and renovation of a property into a single loan. This also means that they’re an option for those who haven’t built up the equity that they need.
Both of these loans have their own types of complexities which can delay loan closing, forcing you to rush the planning process. This can also force you to refinance an ongoing mortgage, usually at a higher rate.
Both FHA 203K or Fannie Mae HomeStyle have a low credit score requirement compared to other alternatives. This also means that these loans are the only option for homeowners with a home’s future value.
5. Personal Loan/ Home Improvement Loan
These loans are usually high-interest unsecured personal loans that are directed towards homeowners looking forward to financing a garage remodel. And while a personal loan will mean that you don’t need equity, this loan is still expensive. As a matter of fact, personal loans and credit cards are always the most expensive method to borrow money. The interest rates on personal loans can go up to 15%.
A higher interest rate generally means that you have to bear higher monthly payments. After you get a personal loan, your capacity to get other loans will drop down. Personal loans come with shorter repayment terms that increase your monthly payments.
For most homeowners, a personal loan isn’t the best financing option for a garage remodel. Especially if you’re taking on a bigger and more expensive project for garage remodeling.
What’s the Best Way to Finance a Garage Build or Remodel it?
It doesn’t matter if you’re remodeling a garage or taking on any other project, chances are the project will be expensive and you’ll need to get money from an outside source. You need to make sure that you choose the right kind of financing option so you don’t end up in enormous debt.
Here are some of the points to keep in mind before picking a financing option for garage remodel:
- How much is your new garage going to cost?
- Do you have a larger renovation wishlist?
- How much money do you need to borrow?
- How much equity do you have in your home?
- What’s your current credit score and your credit history?
- What’s the maximum monthly payment you can afford on the loan?
- How long do you want the loan to go on?
Choosing the right financing option for garage remodel can make all the difference in the world. You should go over the terms and conditions carefully so you don’t end up making the wrong decision when it comes to borrowing money.