Renovate Your Home with Ease: Get a House Loan for Renovation

A home renovation is one of the only investments that can improve the quality of life in your living space and increase the value of your home in the future. Renovating can boost the return on investment (ROI)(1) of a house. Some homeowners want to add more rooms to accommodate an expanding family or to make some kid or elderly-friendly features. Others want to turn their homes into profitable assets, such as rental property or remodel their homes before selling them to get a higher price.

The most important question is how are you going to finance the renovation. With careful research and planning, you can save money and time in the long run.

How you finance your home improvement depends on two factors: the amount of money you have or your willingness to take out for a loan for renovation of home, and the size of the property to be renovated.

Top 5 Ways to Finance a Home Renovation in the Philippines

There are viable options for financing a home renovation in the Philippines. Check out 5 easy methods of financing your home renovation:

1. Personal Savings: If you have savings set aside, it may be a good idea to use that money to pay for your home renovation. This is the simplest and most cost-effective way to finance your renovation, as you won’t have to worry about interest rates or repayment schedules.
2. Home Equity Loan: This is a type of loan that allows you to borrow money using the equity in your home as collateral. Home equity loans typically have lower interest rates than other types of loans, and you can use the money for any purpose, including home renovations.
3. Credit Cards: If you have a credit card with a high enough credit limit, you can use it to finance your home renovation. However, you should be careful not to overspend, as credit cards typically have high interest rates.
4. Personal Loans: You can apply for a personal loan from a bank or other financial institution to finance your home renovation. Personal loans have fixed interest rates and repayment schedules, which can make it easier to budget for your renovation.
5. Home Improvement Loans: Some banks in the Philippines offer home improvement loans specifically for home renovations. These loans typically have lower interest rates than personal loans and credit cards, and they can be a good option if you don’t have enough equity in your home to qualify for a home equity loan.

Home Equity Loans in the Philippines

A Home Equity loan allows you to borrow against the market value of your existing home and use the funds for home improvements. If you want to borrow from the government, Pag-IBIG Home Equity Appreciation Loan (HEAL)(2) allows qualified borrowers to loan an amount based on the net value of their home at very low-interest.

Learn How to
Minimize House Renovation Cost in the Philippines

Home Equity Loans has its  pros and cons, and here they are:

Pros:

• Lower interest rates: Home equity loans typically have lower interest rates than other types of loans, as they are secured by the value of your home.
• Large loan amounts: Depending on the value of your home, you may be able to borrow a large amount of money through a home equity loan, making it a good option for major home renovations or other large expenses.
• Flexible repayment terms: Home equity loans often come with flexible repayment terms, allowing you to choose the length of the loan and the monthly payment amount that best fits your budget.
• Tax benefits: In the Philippines, the interest paid on a home equity loan may be tax-deductible, which can help you save money on your taxes.
• Use of funds: Home equity loans can be used for any purpose, not just home renovations. You can use the funds to pay for debt consolidation, education expenses, medical bills, or any other major expense.

Cons:

• Risk of losing your home: Because home equity loans are secured by your home, if you are unable to repay the loan, you risk losing your home through foreclosure.
• Fees and closing costs: Home equity loans may come with fees and closing costs, such as appraisal fees, origination fees, and title fees, which can add up to a significant amount.
• Time-consuming process: Obtaining a home equity loan can be a time-consuming process, as it often involves a lengthy application process, a home appraisal, and other requirements.
• Interest rate changes: Home equity loans often have variable interest rates, which means that your monthly payment amount can fluctuate over time, making it difficult to budget.

When Obtaining the Home Equity Loan is Ideal: The conditions where applying for a home equity loan is considered well-timed are when home renovations are costly and time-consuming.

You can Improve the value of your home by using Home Equity Loan personal loan to make home renovations. This can be especially beneficial if you are planning to sell your home in the future, and get a higher sale price and recoup your investment.

Home Loan Refinancing

In addition to a Home Equity Loan, you can obtain funds for home renovation by refinancing. Refinancing involves paying out your current loan with a new one. This new loan has a new interest rate, outstanding balance, monthly installments, and repayment terms. You can put the extra cash from your refinanced home loan toward a home improvement project.

Benefits of Home Loan Refinancing

• Reduced monthly payments: refinancing is intended to make loan repayments more manageable.
• Reduced interest rates: one of the most common reasons for refinancing home loans is to pay for lower interest rates.
• You can pay off your loan earlier: If you change your existing loan from a 30-year term to a 20 or 15-year term, you will pay off your loan sooner than expected. Your interest payments will be reduced as well.

Reasons to Refinance Your Home Loan:  Home loan refinancing is only a good option if you have an excellent credit score and history, a substantial amount of home equity, and you have a plan to complete the home loan as soon as possible.

The Downsides of Home Loan Refinancing

There is no guarantee of approval. Having an existing loan does not guarantee approval of a new loan. Lenders will still look at your credit score and credit history. Also, this can prove to be more expensive than other types of home improvement loans.

A new home loan means that you will be paying interest on your new monthly mortgage rather than reducing your outstanding balance. Similarly, switching your loan from a longer to a shorter term will necessitate higher monthly mortgage payments.

Home Renovation Loans in the Philippines: Personal Loans

A personal loan for home improvement is like any other unsecured loan used for personal needs such as business or renovating a house to increase its value. Personal loans for the renovation of a home can be obtained from banks, government agencies and financial companies.

The SSS Philippines(3) and Pag-IBIG loans are among the most dependable government loans.

Some banks that offer this kind of loan include: Security Bank Home Improvement Loan, Citi Bank Home Improvement Loan, and BDO Home Loan.

Some financial companies that offer personal loan: Blend.ph, Easycash, Finbro, and Digido.

When to Opt for a Personal Housing Loan for Renovation:  A personal loan is an advantageous option if you require small home improvement projects, you have a very good credit score, or your home equity is inadequate.

Advantages of Digido Personal Loans

Digido is a digital lending platform in the Philippines that provides personal loans to individuals online. One of the many ways that Digido loans can be used is for home renovation.

Digido personal loan to renovate your house can be a great way to get the funds you need fast to complete your project or small, urgent needs, without having to worry about high interest rates or collateral requirements.

It is important that you can get a loan of up to 25,000 PHP in 15 minutes without leaving your home. Digido has a fast approval process and you can get a loan with only government valid ID