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HELOC vs Personal Loan for your Home Improvement?

HELOC = Home Equity Line of Credit

Since you own your home, a HELOC (home equity line of credit) is a second mortgage that pulls cash from your home value.

HELOC Requirements

1. HELOCs require a credit score of 620 or higher.

2. HELOCs enable you to borrow up to 85% of your home’s value MINUS the balance remaining on your mortgage. 

Let’s look at an example:

Home Value = $600,000 

Mortgage = $400,000 

$600,000 x 85% = $510,000

$510,000 – $400,000 = $110,000

$110,000 is the MAX amount of cash you can pull from your home (i.e. your maximum line of credit)

More than enough to fund your ADU!

HELOC vs Personal Loans for Garage Conversions or ADU

If you qualify for a HELOC (i.e. the 85% rule works for you and you have a credit score over 620), this is usually the best option for funding your garage conversion or new ADU (accessory dwelling unit) build. The reason I say HELOCs are best, is simply because the interest rates will be lower than a personal loan; in addition, since you already have a mortgage with a bank, you can call or schedule a meeting with them to setup this HELOC.

If you don’t qualify for a HELOC, the next best solution to funding your ADU rental unit, is to take out a Personal Loan. My go to bank for this loan is SoFi (they have the best rates, easiest application, and are super FAST!)

Here is the main reason why I choose Personal Loans from SoFi, directly quoting them, “From remodeling to repairing to renovating—SoFi’s got you covered. Home equity loans (HELOCs) may only cover a handful of projects and can even require an appraiser before you even get approved. With SoFi, you can use the money for whatever your dream home demands.”

At the end of the day, no matter the loan type, you just need to look at what an ADU can do for you. Not only will this ADU instantly add value to your home, but you will also start making a second income from the rental income!

CLICK THE BUTTON BELOW TO CLAIM YOUR FREE $100 VIA MY PARTNERSHIP WITH SoFi!

Best Personal Loan for Home Improvements

CLICK THE BUTTON BELOW TO CLAIM YOUR FREE $100 VIA MY PARTNERSHIP WITH SoFi!