You’ve decided to take the next step and transform the vision of your “dream home” into a reality. You’ve done the research, and have chosen the perfect home remodeling project that maximizes your space! Maybe you’ve decided on a master bedroom expansion, or perhaps a luxury bathroom remodel.
But there’s one small detail that remains — what are the best ways of financing your home remodeling project for maximum value?
This is a good way to finance your home remodeling project if you don’t want to take out a loan and pay interest. While a cash-only policy might be difficult for large-scale renovations, it’s ideal for smaller projects such as a new sink or small bathroom.
Home Equity Credit
This financing option allows home owners to borrow up to 85% of your home’s value against your home’s equity. If your home is worth $100,000 and you’ve already paid half your mortgage, then you have 50% equity invested in your home. Multiply the $50,000 by 85% and you get $42,500. This is the likely amount you’ll be able to borrow in this particular case. The amount of the loan fluctuates with the housing market, but it’s a good way to help finance your project!
Cash Out Refinance
This allows the homeowner to make a renovation by rolling the cost of the project into a new mortgage. Using the previous example, you have $50,000 equity invested in your $100,000 home. If the project costs $30,000, then it’s added to your existing mortgage for a new total of $80,000. The interest rate is much lower than a home equity credit, and it’s also tax deductible.
This works exactly like a cash out refinance, except the loan is based on the projected worth of the house after the home renovation is finished. However, it’s important to make sure the renovation will increase the home’s value enough to justify increasing your mortgage.
For more information on ways to finance your home remodeling project, please contact the experts at Southwestern Remodeling. We’re ready to help you with every step of the process!