Financing a new home renovation - Project Loans?
My husband and I have put in an offer on a bank owned property. The home is structurally good but the owners were filthy and smoked in the home for years - has a popcorn ceiling which the smoke has soaked into and had a dog who soiled the carpet. This is a 2 bed/2 bath townhouse. The bathtubs are all stained. Minimally the carpet needs to come out, possibly some subfloor replacement, put in laminate or other budget conscious hard floor (pets and allergies), popcorn ceiling removed, everything including ceilings primed and painted and some bathroom replacements.
We estimate that the renovations to make it habitable will be about $25,000.
We looked into home renovation mortgages, but the interest rates are nearly double what we can get on a conventional 5-1 ARM and closing costs are higher due to fees. We have a 5% down payment we can't do 20% so a HELOC is not possible.
We are considering financing the purchase with a conventional mortgage and then financing the renovation with a Home Depot or Lowes Project loan. The interest rate for the project loan would be higher than the reno mortgage, but the amount needed would be less than 1/10 of the price of the home purchase so it would be paid off faster and result in less interest cost than the home reno loans paying higher rate on the entire post-reno home value.
Has anyone used either Home Depot or Lowes project loans (you can pay their contracts with it and buy supplies). Any feedback on them or other options to look into?