Are you looking for ways to remodel your home and get great financing for your project? With the housing market booming, home values soaring, and interest rates at record-low levels now is a great time to invest in your home. If you’ve taken the time to watch the local housing market, you’ve noticed how competitive home buying is. Buyers buy homes for tens of thousands of dollars over the asking price. Many Northern Virginians choose to remodel rather than buy new products and get creative with financing.
You might need to finance your next home remodeling project for many reasons. While there is no one-size-fits-all home improvement loan, there are plenty of options for people looking to borrow through renovations.
Favorable financing options at the home improvement store, emergencies that require more than you can handle, and even a surprising new addition to your family can make you look forward to making changes to your home.
The benefits of refinancing cash to pay for your home remodeling with financing project
Your equity has grown exponentially over the past few years. Refinancing and cashing out can be a great way to fund your home remodeling project, transform your dream home, and improve your quality of life.
Equity grows in three ways:
- Appreciation: Real estate values increase when there is more demand than supply, as is the case today, often called a “bullish market.”
- Principal Payments: With every mortgage you make, part of it pays the principal you owe the bank, while the other part pays the interest.
- Improvements: When you improve your home, you enjoy it for as long as you live there and increase its value.
With the benefit of your home equity, you can do a money-draw refinance, a new mortgage loan that pays off your old loan and gives you cash at closing. Today’s lower interest rates provide an opportunity to get low-cost loans so that less of your monthly payment of interest and more goes towards paying down the principal, building equity faster.
Interest rates are now so low that cash-out refinancing may increase (or even decrease) your monthly payments if the loan term is extended.
Hillock Loans and Real Estate Shares
Finance your next remodel. If you already have a small amount of equity in your home—the difference between the amount you owe on your mortgage and the value of your home—you might consider using a home equity line of credit (HELOC) or a home equity loan. Both loans work by borrowing against that value. These loans usually have better terms and interest rates because they are secured against your property, which means the lender can foreclose on your home if you can’t repay the money you borrow.
Home equity and home equity loans are often processed faster than traditional mortgages. A quick turnaround time can make all the difference in the world if you’re borrowing money for an unexpected home repair or emergency.
One thing to note: Unlike a home equity loan, which gives you a one-time down payment upfront, a HELOC can be set up slowly over time. Like a credit card, you can pay off your balance and use it again the next time you need it.
Credit Cards for home remodeling with financing
Using plastic to pay for small remodeling needs—such as updating a kitchen sink, replacing a toilet, or even installing new wall-to-wall carpeting—can be a good option for those who don’t need to borrow a lot of money over a long period. Since credit cards often come with lower loan limits than their secured counterparts, they are not usually ideal for more expensive projects. In addition, they come with much higher interest rates because they are unsecured. Some prices are as high as 26%, which means your small improvements can add up to a large price tag if you don’t pay them quickly.
Cash refinancing might be an option if you have a lot of equity in your home and want to borrow a large amount of money and pay it back over time. Like other secured loans, interest rates are generally lower with a conventional mortgage. However, suppose you wanted to finance a repair because of an emergency or because you ran out of money to complete a renovation already underway. In that case, you may have trouble getting approval from the lender.
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Traditional lenders have certain appraisal requirements, meaning that major repairs—such as financing a damaged roof or repairing a flooded basement—can be difficult to approve. In addition, the money you borrow through refinancing will ultimately cost you more in the long run because it will be paid back over the life of the loan (often 15 to 30 years). This payment will include other fees associated with refinancing (such as fees from the lender and your equity firm).
A personal loan is another option for people who want to borrow a smaller amount of money that they plan to pay back quickly. These unsecured loans have no appraisal requirements, so they are suitable to cover the sudden costs of a renovation already underway or unexpected problems that have caught you financially by surprise. However, personal loans may have higher interest rates and lower available funds. If you want to go that route, your local bank or credit union would be a great place to start.
Sheppard Remodeling also offers payment options through Affirm – a simple way for homeowners to pay for a project over time in monthly installments. Confirmed plans are flexible to suit your budget and are available for pre-priced and managed projects.
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