Basement Financing for Finishing & Remodeling

How much does it cost to renovate a 1000 sq ft basement?

Final figures for a basement remodel will depend to a large extent on fit and finish and your contractor’s rate. Upscale fixtures and fittings are always going to cost way more than the budget versions. To give a ballpark figure, costs per square foot range from $7 to $23 with a 1000 sq ft basement coming in at between $7,000 and $23,000.

You can expect labor costs to take about a quarter of the total, but many contractors build that into the total cost rather than charging an hourly rate. When considering such a project, make sure you get at least three estimates from reliable contractors and choose the one that offers the best quality work at the right price.

Basement Remodel Loan Calculator

Is finishing a basement a good investment?

Remodeling Magazine has been gathering data on common home improvement projects for 20 years and in that time the figures have remained remarkably steady for basement remodeling. Their stats show a midrange basement refinish will add about $700 for every $1000 that you spend.

As well as adding value, a basement remodel will add functionality and facilities to your home that you can enjoy and will prove attractive to potential buyers in the future. So while spending, say, $20,000 might only add $14,000 onto the value of your property, it may mean that when you want to sell it, you find a buyer very quickly.

What is the best way to finance a basement remodel?

• Savings and investments - Any sort of loan will cost you money, so using savings and/or easily liquidated investments will be the cheapest way to finance a basement remodel. But many people haven’t got that level of savings or may not want to empty the pot to provide the cash needed for a basement project.
• A personal loan - The commonest way of financing a basement makeover, particularly if you have good credit, is with a personal loan. The lender agrees to give you a lump sum which you pay back, plus interest, regularly over the term of the loan, usually 2-5 years though it may be more. This form of finance is simple to apply for and often offers low interest rates and a generous term. Bear in mind that if you have a low credit score the choice of lenders will be restricted and the interest rates are likely to be high.
• A credit card - Though it is unlikely that a credit card limit could pay for an entire project it could certainly be used to offset a large part of the costs. Credit cards generally don’t have low APRs, but if you can qualify for one that offers a low percentage, sometimes down to 0% for an introductory period, then you are effectively getting free finance. Remember that any outstanding amount will attract the normal APR after the introductory period ends.
• HELOC - A home equity line of credit operates a lot like a credit card with the HELOC provider giving you a line of credit from which you draw as needed. Typically, the interest rates are low and the credit limits high, making a HELOC an attractive option for a basement remodel. And the downside? Your house is collateral for the loan so, should you default on repayments, the HELOC provider could take your home.
• A home equity loan - A home equity loan is basically a second mortgage and allows you to borrow against the equity you have in your property. The lender provides you with a lump sum which you repay, usually over a period of 5-30 years, often with a fixed interest rate. While the terms are generous, you do risk foreclosure if your repayments fall into arrears.

Do contractors offer financing?

Some contractors do offer finance packages, usually in partnership with a third-party lender. Loans provided in this way are typically fairly short-term – 12-18 months – but may be medium or even long-term. If your contractor offers financing, make sure you compare what they’re offering with other personal loans to check you’re getting a good deal.

What are the pros and cons of basement remodel financing?

PROS

• Adds value to your home – You may not get dollar for dollar but a basement refurb will raise the value of your home on the real estate market, especially if your house then has more space than most others in your neighborhood.
• Practicality – A fully-functioning basement will improve your home and financing can make that happen now rather than at some indeterminate time in the future when you have saved enough money.
• Have more living space without moving – Many of us are happy where we live but simply need more space as our family grows. Basement remodel financing allows remodeling as a remedy to that problem without having to relocate.

CONS

• Finance costs money and repayments are another drain on your monthly budget.
• If the housing market changes you may not get a good return on your investment.
• To secure the finance may require you to use your home, or the equity you have in your home, as collateral.

What credit score do you need for basement remodel financing?

The credit score required for basement remodel financing can vary depending on the lender and the specific financing option you choose. Generally, a higher credit score can increase your chances of qualifying for better terms and more favorable interest rates. However, the specific credit score requirements may differ from one lender to another.

As a general guideline:

1. Good to Excellent Credit (670 and above): Having a good to excellent credit score significantly improves your chances of qualifying for basement remodel financing with favorable terms. Lenders typically consider borrowers in this range as lower risk.
2. Fair Credit (580 to 669): With a fair credit score, you may still be eligible for basement remodel financing, although you might encounter higher interest rates or stricter qualification criteria. Some lenders specialize in working with borrowers in this credit range.
3. Poor Credit (below 580): Basement remodel financing options may be limited for individuals with poor credit. Traditional lenders may be less inclined to approve financing, but alternative financing options or specialized lenders may be available. However, these options may come with higher interest rates or less favorable terms.

Can you get basement remodel financing with bad credit?

With lower credit scores, it is still possible to find finance for your basement project, but not only will a loan be harder to come by, but will almost inevitably come at a much higher cost.

How to get a basement remodeling loan

To get a basement remodeling loan, you can follow these steps:

1. Assess Your Financing Needs: Determine the estimated cost of your basement remodeling project. Create a detailed budget that includes materials, labor, permits, and any other expenses you anticipate.
2. Check Your Credit Score: Review your credit score to understand where you stand. A higher credit score can increase your chances of getting a loan with favorable terms. If your credit score is low, consider taking steps to improve it before applying for a loan.
3. Research Lenders: Explore different lenders and loan options available for home improvement projects. Look for lenders who offer basement remodeling loans and have favorable terms, competitive interest rates, and flexible repayment options.
4. Gather Documentation: Prepare the necessary documentation to support your loan application. This may include proof of income, employment verification, bank statements, and a list of your assets and liabilities. Lenders may also require detailed plans or estimates for your basement remodeling project.
5. Compare Loan Offers: Request loan quotes from multiple lenders and compare their terms, interest rates, repayment options, and fees. Consider both traditional lenders and online lenders to find the best loan option for your needs.
6. Submit Loan Application: Complete the loan application provided by the chosen lender. Provide accurate and complete information about your personal and financial details, including the loan amount you are seeking for your basement remodeling project.
7. Await Loan Approval: After submitting your application, wait for the lender's decision. This process may take several days to a few weeks. Be prepared to provide any additional information or documentation requested by the lender during the review process.
8. Review Loan Terms: If approved, carefully review the loan terms presented by the lender. Pay attention to the interest rate, repayment period, monthly payment amount, any associated fees, and any conditions or requirements set by the lender.
9. Accept the Loan Offer: If satisfied with the loan terms, accept the offer by signing the loan agreement. Follow any instructions provided by the lender to complete the loan closing process.
10. Use the Funds for Basement Remodeling: Once the loan is disbursed, use the funds to finance your basement remodeling project. Make sure to manage the funds responsibly and stick to your planned budget.