If you have owned your home for several years, chances are that you may be considering remodeling your house. Depending on the scope of the work, renovating one or more rooms could be costly. However, many homeowners take out a home equity line of credit or refinance their mortgages in order to cover the cost of remodeling supplies and the labor. In making the decision, it is important to weigh the pros and cons to ensure the best financial outcome for your situation.
Before refinancing your property, find out how much equity it currently has. If you recently purchased it, the home may not have enough equity yet to be worth a mortgage refinance. If it does, however, ask about interest rates and loan terms to determine if this route will work with your repayment capabilities. A new mortgage loan, which may be able to accommodate the costs associated with remodeling the house, will likely come with application fees and settlement costs. Compare interest rates and loan terms to see if this option fits with your monthly budget.
How Long You Plan to Live There
Another consideration for refinancing your property to afford remodeling costs is how long you expect to keep the home. Since a new mortgage loan may extend the original loan period by several years, you might not be able to pay off the remodeling investment if you sell the property within the foreseeable future. This move could then cost you money by reducing profit due to added fees when you sell your home. If moving is a consideration for the near future, don't refinance the mortgage before selling the home.
Source: When to Refinance Your Mortgage
Renovation Value Added
Assess the value that the remodeling improvements will add to your home. If the increase is negligible in terms of market value and you plan to sell the property within five years or so, you might want to wait on the remodeling. Otherwise, refinancing to a new mortgage means that you will be paying more interest up front along with refinance or loan fees, so by the time you sell the house, you would earn less profit than if you didn't do the remodeling. Check with a local homeowners' guide or a realtor to find out whether your proposed remodeling plans will be worth the investment. If you really want to add certain renovations but you’re not sure about refinancing or your future at that home, you can also look to installment loans or personal loans to help cover the costs. There are also home improvement loans, but what type of loan you will be able to get will depend on your personal circumstances.
Remodeling a home can add thousands to its value. However, be sure to consider all your options as refinancing can add upfront fees that reduce profit if you sell soon after the remodel.
Jaworski Painting is committed to providing quality painting, from interior and exterior custom painting, to kitchen cabinet refinishing, to more general restoration. If you want to freshen up your house with a new remodel, contact Jaworski Painting for a free estimate!