As a homeowner, the time will come when you’ll need to do some home repairs or renovations. You’ll probably need to replace your roof, or add more rooms to accommodate a growing family, or incorporate features that are friendly for children, the elderly, or the environment. Owning a house is a big investment, and you need to maintain it properly or make a few changes as necessary for it to be nice, secure, and functional for as long as possible and to increase its market value.

Is it time for a home improvement project but you don’t want to dip into your savings or emergency funds? A bank loan could be the answer.  Here are some tips to get you started:

1. Assess, plan, and estimate
Home renovations can be a substantial expense, but you can reduce costs without compromising the quality of your project.

Begin by outlining a comprehensive plan detailing your renovation goals. Which areas need priority? Which parts of your home demand an overhaul? Which issues only require minor repairs? It helps to consult with a contractor early on so that you can better assess the kinds of renovation work required.

Compile a list of all necessary materials and compare prices from various suppliers.  Look for sales and discounts.  Then create a realistic budget and stick to it. Prior to beginning your home renovation project, consider all expenses such as materials, labor, and permits, and make sure they fit within your financial capacity.  When setting a realistic budget, always take contingencies into account. Have enough wiggle room for possible damage during the renovation works or for sudden price increases in materials. Add 3% to 5% for contingencies to your budget estimate.

Taking on some of the tasks yourself can lead to substantial savings. For instance, you can perhaps paint the walls, install light fixtures, and even lay flooring.  To avoid costly mistakes, only go the DIY route if you have the skill and patience to do it yourself.

2. Research your loan options
Banks offer several loan options to fund your home makeover.  The type of loan you should choose would depend on your project size and budget.  For minor and urgent renovations, a personal or credit card loan would typically be enough. But you'll probably require a home equity loan for significant renovations.

When choosing the best bank loan option, consider several things, such as interest rates, repayment terms, eligibility criteria, and other fees. These may vary depending on the type of loan you choose: 

• Home equity loan
  With a standard home loan, you are obtaining funds to buy or build a property.  With a home equity loan, you already own the property and are leveraging its value as collateral to borrow money.  Like in a regular home loan, this type of loan uses your home as collateral.  Based on your property's value, a home equity loan generally provides higher loan amounts, lower interest rates, and longer payment terms compared to personal loans and credit cards. Qualifying for a home equity loan is straightforward if you are a homeowner with a good credit rating. This type of loan is versatile, allowing you to use the funds for any purpose you choose.
   
• Refinancing
  Already have a mortgage on your home? You can consider refinancing to finance your renovation. Refinancing means obtaining a new mortgage from another bank with more favorable terms and using the extra funds for your home renovation. This option can help you potentially reduce your interest rate and modify the duration of your loan. Refinancing your home loan is advisable only if you have an excellent credit score and history, have significant home equity, and have a strategy to pay off the loan promptly.
  
  
• Home renovation loan
  A home renovation loan provides money for renovating, remodeling, or repairing a home. It is usually a personal loan, either unsecured or secured. Eligibility is more flexible than housing loans, needing stable income and a good credit score. Processing is faster due to smaller amounts and less paperwork.
  
  
• Personal loan
  A personal loan is an installment loan that can be used for various purposes, including home improvements. This type of loan is usually unsecured, meaning no collateral is required, and applying for one is faster compared to a standard home loan or home equity loan. Being an unsecured loan, you are charged a higher interest and pay for a shorter period with a personal loan compared to a secured loan.  While missing payments on a personal loan won't risk your home, it can still lead to serious financial issues. If you don’t need a large sum for your home renovation and you need it quickly, a personal loan will most likely do.
  
  
• Credit card loan
  Using a credit card loan for home renovation can be a convenient option for urgent home repairs or simple renovations. A credit card loan allows you to borrow money against your existing credit card limit and repay it monthly, with interest, over a predetermined period. Since you are not applying for a new line of credit, no credit check is required to obtain this type of loan.  While credit card loans offer speed, convenience, and are generally less expensive than cash advances, it’s important to carefully consider its high-interest rates and potential for debt accumulation. For larger renovation projects, exploring other financing options like personal loans or home equity loans might be more cost-effective and manageable in the long term.
  
  

3. Prepare documentation, apply, and submit 
Personal loans usually have minimal requirements and have faster processing time. But for larger home equity or home renovation loans, requirements tend to be more comprehensive. To be safe, make sure you have the following documents and loan application requirements ready:

• Filled out loan application form
• Identification papers (valid ID, TIN, community tax certificate, etc.)
• Statement of account
• Latest income tax return
• For employed applicants: Certificate of employment
• For self-employed applicants: Certificate of registration of business name
• Collateral requirements (Certificate of title, current tax declaration, etc.)

As with all things, it pays to be organized. Make sure you have all the paperwork concerning your property properly stored. File them in labeled folders so you can easily find them when needed. If possible, make multiple copies in advance. When you have all your documentation sorted out, you can start your application process faster.

Depending on the type of loan you’re applying for, you may have the option to send your application online. If so, read the instructions carefully so you’re certain all your documents are well received. The advantage of submitting personally in a bank branch is that you get personal and direct confirmation that your documents are complete.

If your loan is approved, congrats! Just remember to pay up your loan regularly. Make sure that you are always on time with your payments so that you can avoid additional penalties and fees. 

 

When it’s time to renovate your home

Home renovation is often one of the largest and most costly projects homeowners will embark on after purchasing their property. The good news is home improvement has become more accessible today because of the various financing options available.  Keep in mind to select the right option based on practical considerations, specifically the size of the project and your budget. Carefully weigh the pros and cons of each financing choice.

Whether you are fixing up an older home, enhancing your living space, or simply updating your style, Chinabank HomePlus is a flexible and affordable loan option.  You can borrow a minimum of P500,000 and a maximum of 60% loan value of your collateral.  For home renovation, the repayment term is up to 10 years.