The good news is that as you make improvements to your home, the value of the home may go up. As your home’s value increases, so does your equity. Equity is the difference between your mortgage balance and your home’s value. There are several ways of using your home equity to finance upgrades and repairs.
- A Renovation Loan allows you to roll the renovation costs into one loan. You basically refinance your mortgage, while adding the cost of repairs to your loan balance. The FHA 203k program, or the Conventional HomeStyle Renovation program both allow you to do this. You will need to plan all your upgrades in advance, and get bids from the licensed contractors who will be doing all the work. Read all about Renovation Loans here.
- A Cash Out Refinance is another option. Basically, this means re-doing your mortgage for a higher amount, and receiving the balance in cash. If you go this route, you will have more flexibility in who does the work, including even doing some of the work yourself. The downside is you will not be able to use the “after-completed” value of the home to compute how much cash you will be able to access. However, if your home has enough equity already, a cash-out refinance will be easier, and have fewer strings attached.
- A Home Equity Loan or Home Equity Line of Credit (HELOC) allow you to access your equity without touching your existing mortgage. These are also known as second mortgages. If you have a great rate on your current loan, you may be hesitant to refinance it. A HELOC will give you the flexibility to get cash out of your home without needing to refinance. This is an inexpensive way to access your home equity, and the loan proceeds will be deposited directly into your bank account.
Contact our team for more details. Our licensed Loan Officers specialize in making this an easy and stress-free experience for you.