Building a garage at your property or remodeling or converting an existing one is a major undertaking, and it can be an expensive one, too. And for this reason, many homeowners turn to financing to cover the cost of construction and make affordable monthly repayments.  But how do you choose financing for your project? After all, with so many different options, it’s easy to get overwhelmed. 

In this guide, we help to break down the different types of financing that you’re likely considering, from RenoFi Loans and home equity loans to personal loans and more.

The Pros & Cons of 6 Garage Financing Options

We’re the first to admit that it can quickly become confusing when looking at the different garage financing options that exist.

But it doesn’t have to be this way, and below we’ve rounded up the pros and cons of 6 garage financing options to help you to choose the one that’s right for you and that will allow you to borrow all of the money you need with the lowest possible monthly payment. 

A RenoFi Loan

A RenoFi Loan is a new type of home renovation loan that combines the best bits of a construction loan with a home equity loan and can help you to borrow the most money at the lowest monthly payment. 

And they’re the perfect financing option for homeowners who have not built up sufficient equity that they can tap into to pay for their garage build or renovation. And this is music to the ears of newer homeowners who have only recently purchased their property and would otherwise potentially have considered costly personal loans as a way to be able to afford to start construction.

RenoFi Loans let you borrow based on your home’s after renovation value, increasing your borrowing power by 11x, on average, when compared with a home equity loan.

RenoFi Loans come in three forms:

  • RenoFi Home Equity Loans
  • RenoFi HELOCs
  • RenoFi Cash-out Refinance

So whether you need the fixed rate of a home equity loan, the flexibility of a HELOC, or the new rate on a refinanced primary mortgage, RenoFi has you covered with 11x the borrowing power.

When you build or convert a garage, the value of your home increases by an average of 80%, and RenoFi Loans allow you to tap into that today to finance the construction.

You see, it takes time to build equity, and when we consider that it’s not uncommon for a complete renovation wishlist to amount to more than $100k, homeowners often find themselves in a situation where they know what work they want to carry out but aren’t able to borrow the money that they need using equity.

Building or renovating a garage is rarely the only project that someone wants to carry out, but even when it is, recent homeowners will often find themselves lacking the equity needed. 

For some, this means they reduce the scope. For others, it means turning to high-interest personal loans and credit cards or borrowing money from friends and family. We don’t believe that either are right, and increasing the borrowing power of homeowners who haven’t yet built up the equity they need to finance their renovation is one of the main reasons why we launched RenoFi.

If you previously thought your only options would be to turn to a personal loan, to reduce the scope of your project (we’ve heard of homeowners who wanted to build a brick garage downsizing to a cinder block garage, as an example) or to wait until you had enough equity available, we’re pretty confident that a RenoFi Loan could be right for you.

And we’d love to chat through your project with you and help you to understand what makes this type of financing so attractive. Why not arrange a call with one of our advisors? 

Alternatively, use the RenoFi Loan Calculator to see how much you could borrow and what your monthly payments would be.  

The most money and lowest monthly payment for your renovation

Borrow up to 90% of your future home value with a Renofi Renovation Loan


A Home Equity Loan or Line of Credit (HELOC)

Traditionally, a home equity loan or line of credit (HELOC) has been the choice of most homeowners looking to finance a renovation project, whether that’s a bathroom remodel, kitchen remodel or even the construction of an inground pool or outdoor kitchen.

But what’s often forgotten is that it takes time to build up the equity that’s needed to pay for these projects, especially those on the more expensive end of the scale.

Just take a look at the time it can take to build up $100k in tappable equity:

A home equity loan or line of credit might make sense for a homeowner who has the equity available, but what about those who don’t? They’re forced to look for alternatives, reduce the scope of their project or wait many years.

Let’s take a recent homebuyer who bought their dream home in their dream neighborhood. They fell in love with the property and the location, but it’s in need of renovation work.

Those improvements and additions to the property will undoubtedly increase its value, but there’s not yet sufficient equity available to tap into.

This is a real problem faced by many homeowners, making this type of financing out of reach for many. It’s the reason why RenoFi was launched, and we cannot highlight enough the importance of considering all of your options.

Even if you’ve got the available equity to finance the project you’re wanting to get started on right now, ask yourself what happens next time? A home equity loan might make sense right now, but a RenoFi Loan could help you to borrow all of the money that’s needed to finance your entire renovation wishlist. 

A Cash-Out Refinance

Like home equity loans, it’s not uncommon for a homeowner to turn to a cash-out refinance to borrow the money needed to pay for a garage build or renovation.

But a cash-out refinance may not be the best way to finance a renovation.

Why? Because for some homeowners it means that they’re forced to refinance into a higher rate, unnecessarily increasing monthly payments and increased closing costs, given that these are based on the total loan amount, not just the amount that’s needed to finance the renovation.

The exception to this is when refinancing will significantly reduce your interest rate and, as a result, your monthly payments. But why use a traditional cash-out refinance when you could use a RenoFi Cash-out Refinance and borrow 11x more?

It’s important to consider all of your options and understand which will get you all of the money you need at the lowest possible cost. 

A Construction Loan

Construction loans are primarily intended to be used for ground-up construction of a home, but are often recommended as a way to finance a renovation project. And that includes building or converting a garage. 

These loans are often considered because, like RenoFi Loans, they let you borrow based on your home’s after renovation value, meaning that they’re an option for those who cannot use equity.

But we’re firm believers that a construction loan isn’t going to be your best choice. And that’s for 3 main reasons:

  1. You are forced to refinance, potentially into a higher rate that increases your monthly payments.
  2. You’ll end up paying higher closing costs based on the whole loan amount of the mortgage plus renovation costs. These can quickly add up.
  3. A complicated draw and inspection process means that you won’t get the money straight away and that many contractors hate working with this type of loan. Some even refuse to work with them entirely.

If you are considering a construction loan as a way to finance your garage build because of the increased borrowing power, a RenoFi Loan is likely going to be a much better option. 

An FHA 203k or Fannie Mae HomeStyle Loan

Like construction loans, FHA 203k Loans and Fannie Mae HomeStyle Loans let you borrow based on your home’s future value, making them a consideration amongst many homeowners for financing all sorts of renovation projects.

These government-backed renovation mortgages allow you to finance the purchase (or refinance) and renovation of a property into a single loan, again meaning they’re an option for those who haven’t built up the equity that they need.

But both of these types of loan come with their own complexities which can add significant delays to closing, force you to rush the planning process and mean you need to refinance an existing mortgage, usually into a higher rate.

Both of these loans do have a lower credit score requirement than alternatives, however, meaning that they’re sometimes the only option that will allow a homeowner to borrow against their home’s future value if they have a poor credit history.

The credit score requirement for a RenoFi Loan is 660, and if you’re not going to be able to qualify on these grounds, consider either of these loan options and take a look at our FHA 203k Loans vs Fannie Mae HomeStyle Loans guide.  

A Personal Loan / Home Improvement Loan

You’ve probably seen either ‘garage loans’ or ‘home improvement loans’ advertised when considering your options.

But what you might not be aware of is that these are often high-interest unsecured personal loans that are marketed at homeowners looking to finance a specific project.

And while a personal loan will mean you don’t need to rely on equity, this comes at a cost. In fact, personal loans (and credit cards) are almost always going to be the most expensive way to borrow the money you need for your project, with interest rates often between 8% and 15%. In comparison, at the bottom end, that’s almost double what you could pay on a RenoFi Loan.

A higher interest rate means higher monthly payments.

You will find that your borrowing power is reduced when using a personal loan, often making it difficult to borrow all of the money that’s needed. This type of loan also usually comes with a shorter repayment term, further increasing your monthly payments.

For most homeowners, a personal loan isn’t going to be the best way to finance a garage, and better-suited options will exist. This is especially the case for larger and more costly builds.

But, in comparison, for smaller projects at a lower cost, this will be the easiest option, especially when we consider that RenoFi Loans start from $20k. That said, be sure to think about your larger renovation wish list rather than single projects; it might make more sense to choose a different type of financing and get started on that larger project straight away. 

What’s The Best Way To Finance A Garage Build or Conversion?

Whether you opt for a garage or a carport and whether you’re building new or converting an existing one, chances are the project is going to be an expensive one and this is why you need to make sure you have access to the right kind of financing – financing that is ideally suited to your needs. 

And many homeowners are turning to RenoFi Loans to provide them with this. A RenoFi Loan has been specifically designed to assist on this kind of project, providing the perfect balance between a construction loan and a home equity loan.

But when it comes to considering your options and understanding the different types of financing that are available to you, it’s important to ask yourself the following questions:

  • How much is your new garage or renovation going to cost?
  • Do you have a larger renovation wishlist? 
  • How much money do you need to borrow without reducing the scope of the project?
  • How much equity do you have in your home?
  • What’s your credit score and credit history?
  • Do you have any other debt on other loans and credit cards?
  • What is the maximum monthly payment you can afford? 
  • How long do you want to repay the loan over?

Choosing the right type of financing for your garage can mean being able to borrow all of the money you need on the lowest possible monthly payment, so taking the time to consider all options comes recommended. 

Get in touch with our team today to discover more about the benefits of a RenoFi Loan, and to get started on building or renovating your garage.

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