Are you thinking of giving your home a makeover this year? Using your home equity may be the most economical financing solution to get the kitchen of your dreams or a spa bathroom retreat. And your mortgage agent can help guide you through this process.
Home equity is the difference between the current market value of your property and the outstanding balance of your mortgage. Since property values have steadily appreciated over the years, this equity presents an opportunity for homeowners to access funds for renovations without resorting to high-interest loans or credit cards.
HELOC or refinance?
There are a few ways you can access home equity as a homeowner. The two most popular ones include:
1) Home equity line of credit (HELOC); or 2) Refinancing your existing mortgage.
With a HELOC, homeowners can access funds as needed, making it an ideal solution for ongoing renovation projects or unexpected expenses. This way, you only pay interest on the portion of the funds that are actually being used. As you make payments, the credit revolves and becomes available for you to use again. And because the credit is secured by your home, the interest rate is lower than what you would pay on an unsecured loan. Since you’re only required to make interest payments on the money borrowed, however, it’s important to have a repayment plan in place so you’re not continually paying interest.
During a refinance, your existing mortgage is paid out and replaced with a new one that includes the added funds, borrowing against the equity in your home. This option provides a lump sum upfront, allowing for larger renovation projects and/or other uses such as debt consolidation, paying for your kid’s education, purchasing an investment property, etc. Since the extra money is rolled int your new mortgage amount, it’s paid off as part of your regular mortgage payments.
While accessing home equity for renovations can increase the value of your property, it’s important to keep in mind that you’ll be extending the time it takes to pay down your mortgage.
Leveraging your home equity to finance renovations offers a strategic approach to enhancing your living spaces while maximizing the value of your investments. Collaborating with your mortgage agent will help you navigate this financial strategy with confidence, while turning your renovation dreams into reality.
Have questions about home renovation financing or your mortgage in general? Answers to all your questions are a call or email away!Planning Some Home Renovations? Ask Your Mortgage Agent About Financing!
