If you are planning a small design or remodel job, there are plenty of ways to do it without spending a lot of money. However, for the larger jobs, such as a room addition or a kitchen remodel, you might need access to some serious cash. If you’re not independently wealthy, one of the only ways you can get the money you need for a large remodel is to borrow against the equity in your home. There are several options for refinancing your home; here is some information for determining which one is the best for you.

Types of Home Loans

There are four major types of home loans that you can use to remodel your property: conventional loans, VA loans, FHA loans, and reverse mortgages. However, each type of loan has specific criteria for qualifying and using the funds for remodels.

Conventional Loans

Conventional loans are the most versatile of all the home loans in that there are very few restrictions on how you use the money once you qualify. Unfortunately, you have to have an excellent credit score to qualify. If your credit score is below 740 you might end up paying more fees, and a higher interest rate on the loan, and a score below 620 might keep you from getting a loan at all.

However, once you are able to establish that you have enough income and the right credit history to pay back the loan, everything else is pretty much smooth sailing. Once you qualify, you can get the money in one lump sum or in a home equity line of credit that you can use for your remodels and repairs.

Conventional loans are also convenient in that you can get them from any lender that handles home loans, from online companies like Lending Tree to your neighborhood credit union.

VA Loans

VA Home Loans are specifically for veterans, active service members, and their spouses. The government does not service the loan, but it does guarantee it – meaning the government vouches for the borrower and ensures that the loan will be repaid. As a result, VA loans don’t have as stringent credit score requirements as conventional loans. You still need a good score, but not necessarily perfect.

VA loans also require you to meet certain service requirements, and have a valid Certificate of Eligibility, and other paperwork to qualify.

There are two VA Home Loan options for remodels:

·  The Cash-Out Refinance, where you borrow cash against the equity in your home.

·  The Native American Direct Loan Program, specifically for Native Americans living on tribal lands. In addition to the Certificate of Eligibility, your tribal organization must also participate in a VA direct loan program.

·  The Adapted Housing Grant. While not technically a loan, the Adapted Housing Grant will give you money to remodel your home to accommodate a disability. In addition to the Certificate of Eligibility, you also need to provide proof of disability.

VA Home loans are only available through lenders who participate in the VA direct loan program. You can get the details on VA lenders through companies like Low VA Rates, or the US Department of Veterans Affairs.

Reverse Mortgages

Reverse mortgages are only available to homeowners aged 62 or older. Unlike a conventional loan, instead of borrowing against the value of your home and making payments to the bank, the bank pays you in either one lump sum, monthly payments, or a combination and you pay nothing. However, the bank does take ownership of the property when you move out of the home. The home also has to be free and clear, or have a low enough balance that you can pay it off with the proceeds from the reverse mortgage.

Depending on the lender, there may or may not be restrictions on what you can do with the money. For example, some lenders specify that the loan must be used to pay medical expenses. Using the funds for any other purpose could put you in default. However, if there are no restrictions, you can use the loan for any purpose, including a home remodel.

Reverse mortgages are available through a variety of lenders, including HUD.

[Editor’s Note: As a general rule, I don’t recommend borrowing money.  However, a secured loan such as a mortgage falls into a different category than, say, credit card debt.  And if your remodel is going to notably increase the value of the home, borrowing against its equity can be a very reasonable option.]