How to finance home improvements:
Today I am going to talk about some of the best financing options or how to finance home improvements for your remodel right to consider pulling money out of your home or doing something else to get financing right now for a remodel in the upcoming months and year so let’s talk through them that how to finance home improvements, first a very good option can be a home equity loan or a home equity line of credit now this loan is a loan that’s on top of your existing mortgage you have an existing mortgage and you go to the bank and they give you a loan for value that’s in your home and they don’t touch your existing mortgage so this requires that you have equity in your home and it adds a monthly payment and it adds to your existing mortgage.
So the best scenario for this is if you have a mortgage you really like and for some reason don’t want to touch that so either you have an amazingly low interest rate or for some other reason the mortgage is set and you don’t really want to touch it so you can go to the bank and with this type of loan you can typically get up to 80 percent loan to value very easily and then there’s several banks and credit unions right now that’ll give you up to 95 loan to value on this type of loan now the ones that go up to 95 value those often you have to go through an official appraisal which you have to pay for and it just takes a little bit longer and is a little bit more intense the ones that go up to 80 loan to value sometimes you don’t even need an appraisal they’ll just do a valuation based on looking at redfin and Zillow and they’ll do their own evaluation and give you the money so that’s a home equity line of credit the negative things that could go along with a home equity line of credit is that it does add another payment per month it typically is a higher interest rate than you could get through a refinance.
But it’s pretty easy to access and it’s pretty easy to process the second option to finance your remodel is going to be a refinance of your current mortgage where you pull cash out to fund the remodel there are some significant advantages and a couple disadvantages to doing this the advantages are that right now interest rates are historically low particularly for this type of loan and so I’ve had clients recently that locked in 2.2 percent rates over the next 30 years and so some are really incredibly low rates that mean the money that you’re borrowing to do the project is very inexpensive money so that is one major advantage the other major advantage to this is there’s really no involvement from a bank in your remodeling project.
Some of the other loans that you could get to finance your remodeling project will have some bank involvement that the value that the bank or the appraiser perceives that the remodel is going to place on your home will have an impact in your remodeling decisions which most of the time is not a problem. but sometimes it’s nice to not have that additional input oversight and opinion about the value of your home the disadvantages for this type of a loan are really that you’re going to end up paying some type of closing costs now with interest rates being so low often those can get wrapped into the loan and spread out over the life of the loan and so aren’t a significant impact because rates are so low.
But they are a cost involved in getting the money to do your project so the third option to finance your remodel is going to be a construction or renovation loan the great thing about this type of loan product is that you can borrow the money that your home is going to be worth at the end of the remodeling project not just now so let’s say you have a 500 000 home you want to put 300 000 into it after you do this addition and kitchen remodel your home is going to be worth an additional maybe 200 250 000 so you know at the end of the project you’re going to end up with a 750 000 home and that’s what the bank is going to assume your home is worth and they’re going to loan money for you right now and so you could get up to 95 of that 750 000 value now the process is going to be a little bit different based on whether.
It’s a government-backed loan or it’s a local bank oversight loan and the government loans are loans like the 203k or the home style loan those types of loans end up having a significantly more intense level of regulation sometimes they come with an outside loan consultant that is not uh associated with the bank and they end up often just having enough levels of regulation and technicality as far as what you can do what you cannot do with the money that i would say probably the majority of the people that i talk to about that type of loan and even start the process don’t finish the process don’t finance their project that way they look at something else the local bank loans have similar levels of oversight but just to a lesser degree and so they still come with you know the bank is going to oversee the budget for the project you’re still getting an appraisal based on the drawings that we do and the bank is still going to be guaranteed that your home is going to be worth that at the end of the loan.
But you’re a lot freer to do what you want to do and you can have access to more funds generally and you can get up to 95 percent loan to value for the clients that we kind of start that process with a significant number of them end up you know checking the right boxes and the project works and the loan value comes in or the home value comes in correctly from the appraisal and it ends up being a very successful project so it can be a very good option especially for those types of projects where you need significantly more money than you have access to other ways to move to the next step in determining which option is right for you and your project reach out to us directly. so that is is the how to finance home improvements. read more
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