Understanding Loan Terms

2 Kinds Of Loans To Apply For To Finance Your Renovation Work

20 July 2018

Stanley Simmons

If you want to renovate your house to make it bigger or more livable, you are going to need to have some way to finance it so that you can afford all the changes you want. There are various ways that you can do that.

1. Cash-Out Refinance

One thing that you can do is refinance your house. If the current interest rates are lower than the interest rates you are currently paying on your mortgage, then this can be a good idea for you. You will also want to make sure that you have at least 20% equity in your house. The way that a cash-out refinance works is that you refinance the amount left on your mortgage plus an extra amount so that you can pay for your remodel.

So, if your mortgage has $75,000 left on it and your renovation is going to cost around $30,000, then you would take out $105,000. The first $75,000 would go to paying off the old mortgage for the new one, and the additional money would come to you. You only want to do this if the interest rates are lower than your original mortgage; otherwise, you are going to be spending more money in the long run than you otherwise would.

2. Remodel Loans

Your bank may also offer loans that are specifically geared toward doing remodels. Before you get one, you should check into the various criteria for them. For example, you may have to have a certain percentage of equity in your house before you can take out the loan. You may also be able to get a better interest rate on a remodeling loan than you would on a more traditional loan because you are already going to have a house there to act as collateral.

You may also want to check in with a credit union to see if they are able to give you better terms on a loan than you would get from a traditional bank or mortgage company. You will need to join a credit union, but they are generally pretty easy to join. You need to live in a certain county, work in a certain profession, or for a certain company.

If you are going to do some work on your house, you need to make sure that you have the money to do it. There are various ways that you can get home remodeling loans to handle the money for your remodel work.

Share

About Me

When was the last time you realized you were in the red financially? Although most people don't think about their finances on a day to day basis, it can be easy to find yourself living paycheck to paycheck if you aren't careful. I began thinking carefully about the financial implications of some life decisions I was making, and I knew I had to make a difference. I talked with a loan officer about getting things together, and he was instrumental in helping me to work things out. Read more about my financial successes and failures on this little website. You might be able to avoid some of my previous mistakes.