When it comes time to build a garage, you may be wondering how you will be able to afford it. You can get loans that are designed for home addition or even garage loans specifically. If you are looking at your options, keep these things in mind.
Types Of Garages
There are different types of garages and even more affordable alternatives. Before you apply for a loan, make sure you think about all of these options.
Carports
Carports can be an easy and affordable solution for people without garages or who need extra storage space for a vehicle. In addition, they can be helpful for families with children, elderly residents, or disabled members who need rain-protected loading zones.
Carports might require permits from your city, which is the biggest downside. It can be tedious and costly at times to complete these tasks. Also ensure that carports are permitted in your specific community by checking your homeowner’s association and deed restrictions.
Detached Garages
Many purposes can be served by detached garages. Traditionally, you might use them to store your car, but you could also use them for storage, workshops, or a combination of all three. Your home’s value and square footage will increase with these versatile spaces.
Adding a detached garage to your property can cost anywhere from $25,215 to $110,000 on average, making it one of the most expensive improvements you can make to your property.
Storage Sheds
In addition to detached buildings, sheds and barns can be used both as storage spaces and personal spaces. It’s a trend to build “she-sheds” or “man caves” at home rather than spending a great deal of money. You can also make a playhouse for your kids out of a shed.
Estimate Your Costs
It depends on the size, materials, and finishes you choose when building a detached structure. You can find information on materials and costs for your project on several home improvement websites.
There are a number of websites where you can find out how much a garage project might cost per square foot, as well as what you might have to pay for permits, roofing materials, drywall, framing, different types of garage foundations, siding materials, and so on.
Should You Get A Loan For A Garage?
With a debt repayment plan in place, borrowing money to finance a detached structure may make sense.
Personal loans typically have repayment periods between one and ten years, while home equity loans and home equity line of credit have longer repayment periods. Your credit score is at risk if you do not make consistent payments.
Shopping around with several lenders is a good idea if you’re considering borrowing. You will then be able to compare rates and find the most affordable financing option. Your loan will be repaid with interest along with any of these options.
If you are wondering what you can do to finance your garasjelån, keep some of these different types of loans in mind and make sure you understand the terms of each of them.
Personal Loans
In addition to adding a detached structure to your property, you can also consider a personal loan. Unlike home equity loans, these loans don’t require collateral (as opposed to equity loans). Most personal loans can be repaid very quickly, sometimes within a few days of the loan being approved.
Although they are typically more expensive than home equity products, there is one drawback to them. You will also need to repay the money faster than you would with HELOCs, since they have shorter terms.
Depending on your credit score, income, and other debts, you can borrow a certain amount and get a certain interest rate for a personal loan. You may want to consider another financing option if you have less than stellar credit.
Installment Loans
Unsecured installment loans and secured installment loans are the two types of installment loans. Many secured loans are offered to borrowers with less-than-stellar credit scores or thin credit histories during large purchases or when they have less-than-stellar credit scores. The most common types of secured loans are mortgages and car loans.
You can lose your home or car if you default on secured loans, which are backed by collateral. The borrower may run into difficulty making the payments if they do not make the payments as agreed, but lenders usually offer low interest rates with secured loans.
Online lenders, banks, and credit unions offer unsecured loans, which aren’t backed by collateral. Due to the higher risk assumed by lenders when unsecured loans are not secured, they usually have stricter eligibility requirements and higher rates.
Home Equity Loan
Your home’s current valuation, less your remaining mortgage balance, can be borrowed with a home equity loan in the range of 80 to 90 percent. These interest rates are usually lower than those you would find if you refinanced.
Additionally, if your home loan proceeds are used for improvement purposes, you could claim the interest as a deduction. You may not be able to take advantage of this option if you don’t have enough equity in your home.
Home Equity Line of Credit (HELOC)
HELOCs function as second mortgages that allow you to borrow against your home equity for financing. It’s possible to withdraw funds up to 10 years into the future through a line of credit. On the amount you borrow, you will also have to make interest-only payments. Due to variable interest rates, principal and interest payments may fluctuate once the draw period ends.
The average homeowner may find a HELOC appealing. If your home value hasn’t appreciated as you expected due to market conditions or you’re a new homeowner with minimal equity, this isn’t feasible.
Credit Card
Credit cards without promotional interest rates are not ideal for funding garage projects unless you qualify for one. You could end up paying several hundred or thousands of dollars more in interest. Assume you are unable to pay off your credit card balance before the 0% interest period is over. You could end up spending a fortune on converting or building your garage in this case.
Construction Loan
Building loans are generally used for new homes, but garage conversions and new construction are also covered by construction loans. It’s for good reason, too – you may qualify based on how much your home will be worth after renovations.
However, you will have to refinance your existing loan, and the draw and inspection processes are complicated. Additionally, closing costs may be high since your new loan amount is determined by what you owe and what you need to renovate.
Cash-Out Refinance
Cash-out refinancing is used by some homeowners to build or renovate garages. A cash-out refinance gives you the option to borrow up to 80% of the value of your property (minus the mortgage balance). Your existing mortgage balance is then rolled into the loan amount. To secure the new loan, you will also have to pay closing costs.
Monthly payments are steeper when the loan balance is higher. The cash-out refinance wouldn’t make sense if the interest rate were higher.
How to Get a Loan to Renovate or Build a Garage
You should carefully consider the advantages and disadvantages of each garage financing option before applying. Take into consideration a loan from different lenders as you explore your options.
Innovative lending solutions offered through the platform enable you to borrow up to 90 percent of the after-renovation value of your home without refinancing your existing mortgage. Home renovation loans are offered by credit unions nationwide at competitive rates. Online loan calculators provide information on monthly payments, interest rates, and borrowing power.
It is important to know why you are building a garage or other structures before you start building them. Is it only for the purpose of housing cars? Are your building efforts aimed at increasing the value of your house when you sell it? Is it your intention to make money by renting it out short-term? Which is the project you are working on?
The next step is to decide how you will pay for your garage or detached building after you have determined its structure and purpose. Home equity lines of credit (HELOCs) and cash-out home refinances are classic home financing options. A personal loan based on your credit will also be available, as will loans for remodeling expenses and dedicated garage loans.
