With house prices rising in many markets across the country, millions of homeowners are choosing to stay in their current homes and go the home improvement route instead. Not only will that increase the value of your home, but it will also help you avoid the need to make a costly and disruptive move.
But home improvements can also be expensive, rising to the level of needing a loan to complete the work. For that reason, MU30 has created this home improvement loan calculator to help you determine the real cost of making home improvements.
What’s Ahead:
Home improvement loan calculator
Getting a home improvement loan
How the home improvement loan calculator works
The home improvement loan calculator allows you to calculate a new loan either by loan term or by monthly payments. That will give you a choice over how you want to handle repayment on the loan. You can either choose a shorter term to get the loan paid off as soon as possible, or you can select a monthly payment amount that fits neatly within your budget.
The calculator will ask you to supply three pieces of information:
- Loan amount.
- Loan APR (the approximate interest rate you expect to pay).
- Your choice to either calculate my loan term or by monthly payment, as described above.
If you choose to calculate by loan term, you’ll also be given a choice of terms ranging from 12 to 84 months, as well as an option to make an extra monthly payment to reduce the loan term and the amount of interest you’ll pay. You’ll then hit the calculate button to get your results.
Those results will include:
- Your estimated monthly payment.
- The amount of interest you will pay over the course of the loan.
If you choose to calculate by monthly payment, you’ll then be asked to enter an expected monthly payment. For example, if you take a $25,000 loan at 7%, and you decide $300 will neatly within your budget, you’ll enter $300 and hit the calculate button.
The results will include the 1) months to pay off the loan, 2) the years to pay off the loan, and 3) the interest paid over the course of the loan.
An example using the home improvement calculator
Let’s say you determine that you need $50,000 to complete home improvements on your property. But you want to know what the monthly payment will be as well as any options that will affect the amount of that payment.
You can use the calculator choosing to both Calculate by Loan Term and by Monthly Payment.
You’ll start by entering the following:
- Loan amount: $50,000.
- Loan APR: 7%.
- Select a choice: Calculate by loan term.
- Loan term (months): 60.
- Extra monthly payments (optional): $0.
Then hit calculate.
The calculator will reveal your estimated monthly payment will be $990.06, with $9,403.60 in interest paid over the 60-month term.
But let’s say you decide a $990 monthly payment is too high for your budget. You can go back to “Select a Choice” and click the calculate by monthly payment bubble. Another box will appear below, “Expected monthly payment”. If you decide a $600 monthly payment is a better fit for your budget, enter that in that box, then hit Calculate.
The calculator will show you three results:
- Months to payoff: 114 months.
- Years to payoff: 9.50 years.
- Interest paid: $18,400.
Whether you use the calculate by loan term or calculate monthly payment method, you’ll be able to enter different numbers and run various scenarios to come up with a loan amount, rate, term, and monthly payment that will work for you.
When you find a combination that will work for you, you can then begin your search for a home improvement loan lender.
Where to get a home improvement loan
Fiona
Fiona stands out among aggregators (a place where you can shop for multiple loan rates from a variety of companies) because their application process is ridiculously easy. They partner with some of the most popular lenders, such as SoFi, Prosper, and Marcus by Goldman Sachs, and you’ll get your potential rates in seconds.
When you decide which lender is right for you, Fiona can help walk you through the often rigorous loan application process. The good news is, you’ll already know the rate you’ll likely get.
You can shop for personal loans through Fiona, which can easily be used for home improvement projects – in fact, it’s even one of the designated categories you can get rates for.
LendingTree
LendingTree is probably the biggest and best-known online loan marketplace on the web. It’s a source for all types of financing, including home loans, personal loans, credit cards, auto loans, student loans, and business loans. And because it includes participation by dozens of major lenders in each loan category, it’s an opportunity to get multiple loan quotes after completing a single application. That will give you an opportunity to do a side-by-side comparison of the loan products that will work best for you and offer the most favorable pricing.
If you get a home improvement loan on LendingTree, you can certainly get a home loan, such as either a refinance or secondary financing, like a home equity loan or a home equity line of credit. But if you don’t want to pledge your home as security for a new loan, you should also consider investigating personal loans for your home improvement needs. You can borrow as much as $40,000 to $100,000, with no collateral whatsoever, and pay the loan off in installments with a fixed term, interest rate, and monthly payment. Since the funds from a personal loan can be used for any purpose, you can also use them for home improvement.
Credible
Credible is also an online lending marketplace, but one that specializes in personal loans, student loans, home financing, and credit cards. Once again, you can consider either direct home financing, like a home equity loan or line of credit, or a personal loan.
Like LendingTree, you can get quotes from several different lenders after completing a single application. Personal loan lenders on Credible include some of the top names in the industry, including Avant, Discover Personal Loans, Prosper, SoFi, Upgrade, and Upstart.
Credible Operations, Inc. NMLS# 1681276, “Credible.” Not available in all states. www.nmlsconsumeraccess.org.” Credible Credit Disclosure - To check the rates and terms you qualify for, Credible or our partner lender(s) conduct a soft credit pull that will not affect your credit score. However, when you apply for credit, your full credit report from one or more consumer reporting agencies will be requested, which is considered a hard credit pull and will affect your credit.What you should know about home improvement loans
Though there are loans specifically titled “home improvement loans”, it’s really a catchall phrase that describes several different loans that can be used for that purpose.
When shopping for a home improvement loan, it’s important to keep that fact in mind. While getting a home equity loan or a home equity line of credit may seem like the instinctive loan choice, it’s certainly not the only one. And it may not even be an option if you lack sufficient equity in your home. As well, you may find the restrictions on using a home equity loan for home improvement to be greater than it is with other loan types.
That’s why it’s mission-critical to consider all loan options when it comes to home improvement.
How to finance your home improvement project
Fortunately, there are several different financing options when it comes to home improvement. The one you select will depend on your financing needs and personal preferences. Let’s take a quick rundown of the options available.
0% introductory APR credit card
Many credit cards offer either introductory 0% APR on purchases or will make them available periodically on an existing credit line. The advantage of this type of financing is that it’s very simple to use. If you qualify for a card with the offer – which usually requires good or excellent credit – you’ll have access to several thousand dollars in borrowing power that you can use at your own pace.
Another advantage of this type of financing for home improvement is the flexibility you’ll get. You can borrow only as much as you need and repay on your own terms. However, be aware that the 0% introductory APR typically lasts only 12 to 18 months. The maximum loan amount will generally be no more than $10,000, so this method will only be suitable for smaller improvement jobs.
One of the best cards on the market right now is the Chase Freedom Flex℠ which offers a 0% Intro APR on Purchases for 15 months. But it also offers a TON of cash back opportunities, including 5% back on bonus categories that rotate each quarter, 5% back on travel purchases (booked through Chase Ultimate Rewards), 3% cash back on dining and drug store purchases, and finally, 1% cash back on all other purchases.
Personal loans
Available through LendingTree and Credible as described above, the major advantage of this type of loan is that it can be available in higher loan amounts – as high as $100,000 – and is totally unsecured. That makes them an especially good option if you don’t have sufficient equity in your home to complete the home improvements you want.
The major disadvantage is that the monthly payment on a large loan amount can be high since the loan term is typically no more than five years. However, some of the lenders participating in the above platforms will go out even farther on the term, from seven years to as long as 12.
Home equity loans and home equity lines of credit (HELOCs)
These are the most traditional sources of home improvement loans and may be the very best option if you have sufficient equity to cover your home improvement needs. Interest rates are low, and you’ll have more control over the term of the loan, and therefore the monthly payment. But once again, the major disadvantage is that if you don’t have sufficient home equity, this won’t be a viable route.
Cash-out refinance
Using this method, you’ll do a full-on refinance of your home, repaying any existing indebtedness, and taking out sufficient equity to cover your home improvement costs. It works especially well if you have a lot of equity in your home and prefer to handle all your home financing needs under a single loan and monthly payment.
But much like a home equity line of credit or a home equity loan, its success will depend on the amount of home equity you have. Also, be aware there are significant closing costs involved in doing a refinance, which can range between 2% and 4% of the new mortgage taken.
Summary
When you need to do a home improvement project, there’s a good chance you’ll need to find a loan in order to complete the process. Using Money Under 30’s calculator above, you’ll be able to tell how much you can borrow comfortably to fit the payment into your budget.
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