We understand that considering a large renovation project in today’s unpredictable economic climate can be a little nerve-wracking. But we want you to know that it’s not only possible; it can still reap a large ROI — when you use a RenoFi loan.
That was exactly the case with the owner of a charming single-family home outside of the city of Philadelphia. When looking to do significant interior renovations, they chose a RenoFi home equity loan of credit (HELOC). And it paid off, big time.
If you’re interested in learning more about HELOCs and how these loans can help you tackle a similar interior renovation project on your home, continue reading for more info on this loan case study.
Qualifying for the RenoFi HELOC
There’s one major difference between a traditional HELOC and a RenoFi HELOC: borrowing power. While a traditional HELOC only allows you to borrow against the current value of your home, a RenoFi HELOC lets you borrow against the after renovation value, or future value of your home, giving you so much more to cover your entire wish list.
In the case of this particular homeowner, they knew that the scale and type of their interior renovations would certainly increase the value of their home, so a RenoFi loan would allow them to borrow a lot more.
While their peak combined-loan-to-value (CLTV) ratio was 88.11%, their after repair value (ARV) CLTV was 50.35%, putting them in a much lower risk bracket to lenders. And when their home was appraised based on their home’s projected ARV versus its current value, the difference was huge. The max loan they could borrow went from $297,549 to $427,549!
Now, you’re probably wondering if you would even be eligible for a RenoFi HELOC. As a comparable starting point, check out some of these homeowner’s statistics:
- DTI Score: 40.1%
- Credit Score: 722
- Monthly Income: $6,191
With a mortgage balance of $202,451, this homeowner had $2,400 in monthly debt but $65,600 in assets. Given these financial circumstances, the homeowner was able to qualify for the following rates:
- As low as: 4.990%
- Actual loan rate: 5.15%
A Rewarding Renovation
When their project wrapped up, the numbers spoke for themselves. The interior renovation was valued at $281,000, but this homeowner made back significantly more. With a previous home value appraised at $400,000 and an ARV of $700,000, the investment brought in huge returns. Here’s the breakdown:
- Estimated after renovation value: $500,000
- Actual after renovated value: $700,000
- Estimated ROI: 44.48%
- Renovation ROI: 106.76%
If you’re thinking about remodeling your home, RenoFi would love to work with you — no matter the time of year. We can help you finance your next interior or exterior home renovation project with a loan that maximizes your borrowing power and brings you the best returns. Check out our other loan case studies for more real-world examples of using RenoFi loans. And contact us to get started today!
