When homeowners were looking to finance a significant home renovation in the Philadelphia suburbs, they came to RenoFi to explore their options. The project included a complete kitchen remodel, a new basement door and back deck, as well as a whole new addition to entertain friends and family. For a renovation of this size, we knew a RenoFi home equity loan of credit (HELOC) was the best loan option for their family.
If you’re considering a project of similar scope, we’ll show you how the RenoFi HELOC helped our homeowners create their dream home — and how it could do the same for you.
The Loan
A HELOC is a revolving line of credit that’s borrowed using your home’s equity as collateral. Offering flexibility similar to a credit card, homeowners can draw the amount they need (up to their limit) whenever they need it without refinancing their first mortgage. This first phase, known as a draw period, typically lasts 10 years and is followed by a repayment phase of 15-20 years.
Unlike a home equity loan that gives homeowners all the money in a lump sum, this structure allows them to tap into the line when needed and only charge interest on what is used rather than the entire loan.
Working with RenoFi’s partner lender, our homeowners quickly closed on a HELOC loan that fit the project budget. For a project of this scope, a RenoFi HELOC allowed the homeowners to have even greater borrowing power than a regular HELOC since they could borrow against the after renovation value of their home versus the current value — up to 90%.
With a credit score of 830 and a debt to income (DTI) score of 32%, our homeowner qualified for a rate as low as 4.38%. But in the end, officially secured a rate of 4.00%.
The Renovation Scope
Located in beautiful Montgomery County, Pennsylvania, just a short drive from Center City Philadelphia, the homeowners knew it would take substantial updates in order to love their home as much as they do its neighborhood. These upgrades included a brand new kitchen, a new deck off the kitchen, a new Bilco door in the basement, and the addition of a new living space.
Not only were these renovations important to meet their family’s needs, but they also offered a big return on investment (ROI) both in the short and long term. On average, an addition project is one of the top long-term value drivers due to the additional square footage it provides a property, while a kitchen remodel ranks amongst the top three projects in regard to short-term value. As one of the home’s most utilized spaces in the home, any upgrades that improve functionality and practicality can pay off big time. In some of the hottest housing markets, it could mean a 100% or more return on renovation costs.
For these homeowners, even the new deck garners similar pay offs since it offers an extension to the kitchen area, providing additional functional space to eat, gather, and entertain guests.
With a renovation start date of September 13, 2021, the homeowners had an estimated monthly RenoFi payment of $370.23.
The Results
On August 24, 2022, our homeowners received their certificate of completion. Their loan totaled $84,000 in order to cover a renovation value of $83,200. In the end, the homeowners not only had beautiful new living spaces inside and out, but they also increased the value of their home by around $60,000.
Full details about the loan our homeowner’s qualified for and the value it provided are below:
| Description | Value |
|---|---|
| FICO score | 830 |
| Debt to income score | 32% |
| Actual loan rate | 4.00% |
| Estimated monthly RenoFi payment | $370.23 |
| Renovation value | $83,200 |
| Amount of the loan | $84,000 |
| Original value of home from appraisal | $470,000 |
| Estimated after renovation value | $530,000 |
Contact RenoFi today to learn how we can help you complete your next renovation project.
