How to Leverage a Personal Loan to Maximize Home Sale Value

By John Giannone | October 28, 2022

Pre-sale home improvements will maximize your home value and expedite the sale of your home. Sounds great in theory, but the process can seem hard to actualize. One may not have the cash on hand to benefit from these improvements or may not want to tap into their savings to pay for it. In this article, we’ll walk through a step-by-step example of how a personal loan can be used for your pre-sale home enhancements and how it can have a great return on your investment (ROI).

1. Consult your Agent

Before listing or even photographing your home to list for sale, you should walk through it with your real estate agent. This walkthrough will identify any upgrades your agent recommends that will help sell the home faster and get you more money.

Generally, these include painting, removing carpeting, decluttering/depersonalizing, making repairs, staging, or even renovating your kitchen and/or bathrooms. You should be sure only to make upgrades that give you the best return on your money, focusing on the kitchen and bathrooms. According to Zillow, minor kitchen remodels, where you replace cabinet fronts, hardware, countertops, backsplash, and upgrade appliances, have an average ROI of 81%. This means spending $20,000 on the kitchen should increase your home’s value by about $36,000. You can review our separate article, Five Simple Home Improvements to Maximize your Home’s Value, for more information on the best home upgrades.

After reviewing the suggested upgrades with your agent, you should reach out to a contractor you know or ask your real estate agent to recommend one and any other vendors you may need. Remember, with Feeasy®, you are free to use any contractor or vendor you would like – we do not have a pre-set list that you must choose from. You should meet with multiple vendors to compare prices and select the one that works best for you.

2. Secure Financing and Pay Vendors

Once you know how much your pre-sale home improvements will cost, you should check your rate using Feeasy®’s platform, where you can compare pre-qualified personal loan offers from over 50 lenders without affecting your credit score. Please head over to our separate article Three Simple Steps to Getting a Personal Loan to learn how easy securing financing is through Feeasy®.

Once you receive your loan proceeds via wire transfer directly to your checking account, you may pay your contractor/vendors as you normally would. Your first loan payment will generally be due one month from your loan fund date.

Example

Let’s assume the total cost of the work suggested by your real estate agent comes out to $30,000. Assuming you are qualified, you may consider taking out a personal loan for a bit more than you need and save the difference to make payments until your house sells. This way, you are not out of pocket. Let’s say that using Feeasy®, you secured a $40,000 loan with a term of 48 months at 5% APR. In this case, your monthly payment is roughly $920. This would allow you to pay the costs of the improvements and have $10,000 left over to make payments on the loan for about ten months without going into your pocket. In many cases, this may be longer than it will take to sell your home.

Let’s also assume that from the time you receive the loan proceeds, make the improvements, and sell/close on the house is four months, and your ROI on your spend is 60%. In this case, you would spend $30,000 on improvements but get $48,000 back when you sell. At closing, you would then pay off the remaining loan balance of approximately $36,000 and keep the difference ($12,000) plus the six remaining payments of $920 that you didn’t use ($920 x 6 = $5,520) for a total gain of about $17,520.

There can be a huge benefit to making home improvements financially. Remember that these home improvements are likely to help sell your home faster, which means less time carrying the cost of it while it’s on the market. You should consult your real estate agent about pre-sale home improvements and use Feeasy® to assist you in securing a personal loan to maximize your home value.

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Minimum Period for Repayment: 1 year

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Personal Loan Repayment Example: The following example is for illustrative purposes only and depicts the APR, monthly payment, and total payments during the life of a $20,000 personal loan with a 3-year repayment term, and a fixed rate between 8.00% APR–35.99% APR. It works out to 36 monthly payments ranging from $581.54–$915.96 for a total amount of payments ranging from $30,935.44–$32,974.63. This repayment example assumes that all payments are made on time, with no pre-payments. Actual rates may vary based on repayment term, loan amount, creditworthiness, and other terms and conditions. Each state has specific rules and regulations that govern lending partners. The amount you can borrow, the APR, and repayment term are based on your state's laws, the lending partner, and your creditworthiness.

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