RenoFi wants to facilitate the financing of renovations by owners
Back in 2016, Justin goldmanThe young family of s had just moved to a suburb of Philadelphia, in a house that ticked most of the boxes: great neighborhood, good school district, close to the office. But the house itself needed work. “We fell into the same trap that a lot of homeowners fall into – you watch HSTG and you’re fooled into thinking home improvement is cheap, easy and quick, ”says Goldman Home affairs. “We had entrepreneurs who came out [with] estimates that were more than twice what we budgeted, saved and planned. So he went to his bank and asked about his home equity loan options, only to find that he hadn’t built up enough equity to cover the renovations. It was there that he saw a business opportunity.
Courtesy of RenoFi
For designers and contractors, customers facing the shock of stickers is nothing new. For many, projects are either reduced in scope or abandoned for lack of sound funding options. “For every other major purchase people make in their lifetime, there is a fundraising product,” Goldman explains. “You buy a house, you get a mortgage. You buy a car, you get a car loan. When it comes to renovating, the only options people really use are cash refinancing and home equity loans, and none are actually designed for renovations. A review of the landscape quickly showed Goldman that while lenders were willing and able to provide these loans, the supporting infrastructure was not there.
In 2018, he launched RenoFi as a lending platform that would fulfill this role, and by June of last year, the company had raised more than $ 7 million in venture capital, led by Canaan Partners and First Round Capital. Here’s how it works: RenoFi matches homeowners with credit union lending partners, but it also guarantees home improvement risk, with loans based on a home’s future value. “If someone is going to use this money to improve a house, why can’t they [lenders] see what the house will be worth after the renovation? Goldman said. “People should be able to borrow equity based on the future value, not the current value of a house. “
The process is quite straightforward. Customers use RenoFi’s proprietary loan calculator to get an idea of their maximum borrowing power, potential rates, and an estimate of monthly loan payments. Then, the potential borrower goes through the platform’s screening tool to determine their eligibility, providing the contractor information, a detailed project cost estimate, and the contractor’s plans and drawings for the project. With this information, RenoFi assigns a dedicated advisor, who gives an introduction to one of the platform’s lending partners.
“[As part of] our due diligence, we review the contractor, making sure they are licensed and insured, and we also review the contract between the owner and the contractor [to] make sure everything is fine, ”Goldman says. “We make sure that the scope and budget match and that it is in place to be successful, so that the lender has the confidence to make these types of loans available to their members. “
Home renovations saw a dramatic increase during the pandemic, creating RenoFi for renewed interest in financing options – in the fourth quarter of 2020, the platform’s lending partners made 650% of loans in more to owners than the previous year. “As spring approaches, many homeowners will be thinking about renovating, but might not know how they’re going to finance it,” he says. “We are here to increase the borrowing power of homeowners.
Many RenoFi employees are former contractors and other home improvement industry veterans, bringing their expertise in the process to homeowners. Over the past three years, the company has developed relationships with regional credit unions in 49 states and plans to continue expanding its institutional relationships to support clients wherever they are. “We realized that homeowners needed financial products specifically for renovations, so we filled that gap,” he says.
Home page image: © Sergey Nivens | Adobe Stock