Are you remodeling your home? Here's how home improvement loans work.

Maintaining your home and keeping it in top condition is a difficult task that can be expensive. Over time, the property may show structural damage, worn paint, or worn finishes and flooring.

Given this, the owner must make a significant investment in keeping the property in top condition, especially if they plan to put it up for sale. Experts assure that remodeling a home before listing it can increase its value when closing a deal.

One of the alternatives available for home remodeling is to obtain a remodeling loan. These financial instruments are offered by banks, government institutions such as Infonavit , and some crowdfunding fintech companies .

It's important to understand and compare the requirements, conditions, and financial costs of obtaining a loan of this nature, and to consider the amount of debt required to repair or remodel your home.

How do they work in traditional banking?

The requirements and conditions required will depend on the financial institution. According to the terms and conditions of the country's major banks, this loan can be used for structural improvements, interior renovations such as finishes or flooring, basic installations and technological upgrades, and repairs and exterior spaces.

Requirements for applying vary depending on the bank; however, all require current identification, proof of residence no older than three months, and proof of income.

BBVA also requires a minimum age of 25 and that the loan be repaid before turning 85. Additionally, proof of a minimum length of service in your current job is required, depending on the value of the property.

In addition to these requirements, Scotiabank reviews the program and budget of the property plans to determine approval and conditions.

In traditional banking, remodeling loans operate on a similar basis to mortgages.

The loan will be subject to the property appraisal, and you will be lent a maximum percentage of the loan. The loan will also have a repayment schedule with terms ranging from five to 20 years, depending on the bank, and a fixed interest rate.

According to bank information, interest rates start at 9.38% at Banorte, 9.15% at BBVA, 10.49% at HSBC, and 12% at Scotiabank. All banks offer a fixed annual rate.

Infonavit remodeling credit

If you're an Infonavit beneficiary, you can access loans for home remodeling, repairs, and renovations. These loans can range from 10,318 to 163,030 pesos, but not exceeding 90% of the accumulated balance in your Infonavit account.

To access this financing, Infonavit requires a current employment relationship, registration with an Afore (an affiliated pension fund), authorization to check the credit bureau, and no active Infonavit loan. The loan term cannot exceed 70 years of age for male applicants and 75 years for female applicants.

In addition, this government agency stipulates that the loan will only be granted for housing projects where the beneficiary resides and must be in the name of the loan applicant, their spouse, children, siblings, parents, or in-laws.

The interest rate will be 10% per year for loans up to 41,273 pesos, and for loans above that amount, the interest rate will rise to 11%. The beneficiary can choose the term over which they will repay the loan, which can be between one and 10 years.

A responsible loan

Various financial management experts agree that total loan payments should not exceed 30% of monthly income to avoid insolvency or financial stress.

Also, when remodeling, it's important to seek expert advice to ensure a solid project, find quality materials at a good price, and achieve lasting results in your home.