What to Know about Financing Your Remodel
Remodeling a specific interior space or even the entire house can be expensive. As you start to go over costs, you'll likely realize that you need more money than you've saved for the project. Home remodeling loans can allow you to complete that new kitchen or bathroom; however, you should be aware of the following things before taking one out
Combine Cash with a Loan
You may want to get a full remodeling loan for all project costs, even if you've got money saved. However, remember that you'll have to pay interest on loans. If you can eliminate some interest by using saved money for at least part of the remodeling costs, you'll be in a better financial position when the job is finished.
Know the Equity in Your Home
When home remodeling loans are sought, you'll notice discussions revolve around equity. The home or property equity is the amount that you've already paid toward the mortgage. This amount is directly relevant to the amount that any lender will give you as part of a remodeling loan. The more you've already paid down, the more you're likely to be able to borrow for whatever improvements you're planning on making to the home. If you don't already know how much equity you've got in your house, look over mortgage paperwork or ask your current mortgage lender.
Think Twice about Re-Mortgaging
You might start to consider getting a second mortgage on the house, particularly if your home has already been paid for. This can seem like an easier way to get the funds you want. However, understand that this avenue will require that you pay closing costs on the new mortgage, and these costs could certainly be more expensive than any fees you'd be dealing with for a particular remodeling loan based on the equity in the property.
Consider a Line of Credit
An alternative to a straight remodeling loan is a line of credit. The line of credit relies on your home's equity as a loan might, but instead of having a fixed loan amount, you have a certain amount that you can draw on as needed. This will have an adjustable interest rate, unlike a standard loan. A line of credit could be useful if you're not sure how much you may need.
You should understand and carefully consider the above details before making a decision. Remodeling or renovation loan topics can be further discussed with lender professionals who can explain how your particular remodeling project loan may go.