Whether remodeling to entice buyers or renovating to stay, it’s gonna cost you. Before diving headfirst into a pricey project, take time to figure out your finances. Experienced lenders from Finance Factors, Bank of Hawaii and First Hawaiian Bank can help make homeowners’ remodeling dreams a reality. Here, they answer frequently asked questions and offer advice for making home remodeling truly affordable.

Homeowners can start by meeting with a loan officer, who will review their personal and financial situations. This consultation helps homeowners understand what they can afford—
prior to hiring a contractor. “Don’t start making plans before you understand the real scope of the project,” says Eric Hodnefield, of Finance Factors.

Consultations and loan preapproval are free and make the process more realistic, as well as less stressful. Pom Luxton, of Bank of Hawaii, suggests, “Homeowners need to know their financial qualifications first to understand which loan programs would fit their needs best.” Prequalification lets homeowners know exactly what they can afford.
There are many options: In addition to refinancing, standard fixed-rate and adjustable-rate mortgages, interest-only loans and portfolio loan programs, several banks offer innovative lending options, such as construction loans—specifically for remodeling.

Construction loans are “story” loans, meaning the lender has to know the story, or circumstances, behind the construction project before it lends the money. A construction loan can be customized to take into account the future value of the property after renovation. These loans are typically variable-rate loans priced at a spread to the prime rate, or other short-term interest rate. They usually require interest-only payments during construction and become due upon completion. Many homeowners opt to use construction-to-permanent financing, which is later converted to a mortgage.

Borrowing against a home’s equity is another option. First Hawaiian Bank offers Equity Firstline Plus, a home equity loan that allows clients to make interest-only payments, as well as offering the option to lock rates for a specific term. In most cases, an appraisal is made to determine the property’s value; the loan may be up to 89.9 percent of the home’s equity for detached single-family homes. Secured loans, such as Equity FirstLine Plus, often offer a lower interest rate compared to credit cards or personal loans. “Putting your equity to work for you is an excellent idea, especially if you have a lot of equity built up in your home,” says Wes Young, of First Hawaiian Bank. The interest paid on the loan may also be tax deductible.

With all the lending options out there, it’s easy for homeowners to get overwhelmed. Take a deep breath. A loan officer is there to help. “When it comes to finding the right lending option, the client’s loan officer will be his best friend,” Hodnefield says.

Who To Call

Bank of Hawaii,
Mortgage Banking Division
Honolulu, HI 96846
1-888-643-3888
www.boh.com

Finance Factors
1-800-648-7136
522-2000
www.financefactors.com

First Hawaiian Bank
999 Bishop St.
525-5182
www.fhb.com