Why do a renovation loan over just taking the money out using a home equity loan?
Sometimes a home equity loan does make more sense but there are two major reasons why a renovation loan may make more sense. First, a traditional home equity loan will only allow you to use the current (before improvements) value of your home as a basis to calculate your loan amount. If the project is large enough, you may need to use the completed (after improvement) value in order to borrow enough money to cover the cost of the project. Second , Home Equity Lines of Credit are prime based adjustable rates and are really not suitable for long term financing needs.
