How to Finance Your Home Improvements
Julie Sanfilippo
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GUEST POST
We are design experts but not financial ones…but we know people often debate the best way to finance their home improvement projects or maybe aren’t aware of all the options. That’s why we’ve brought in an expert on this post. Welcome to our guest blogger, Jennifer Nunes. Jenn is an amazing mortgage broker! She is knowledgeable and always wants to help people reach their goals. She’s also so great to work with, just take a look at this girl’s referrals. Seriously. We have added some of our renovation project images for inspiration. Take it away Jenn!
Jennifer Nunes – Province Mortgage Associates
PLANNING SOME HOME IMPROVEMENTS BUT DON’T HAVE THE CASH?
Using your home’s equity position may be your answer!
You bought your home and love it! Congratulations! Or, maybe you do not love it at all! Many folks out-grow their home faster than anticipated. Is your kitchen from 1996? Maybe you would just love a mudroom or bigger closet? Like many homeowners, there may be some repairs you knew would be needed when you purchased, or the inevitable position as a homeowner comes up where your lovely home just needs a little TLC and maintenance. Did you know you could use a home loan as an instrument to finance these projects? Even the projects that are not necessity, but perhaps simply making your home more beautiful. or suitable for your family. The ever-popular question often comes up; How in the world will I pay for it?
In this post I will be sharing ways to use your homes equity position to pay for your home improvements. I will tell you more on that in a bit. First, let me take a moment… let’s get real. I want you to love your home, grow with your home, but I do not want you to get into a position where your set up to lose financial security. Home ownership is meant for responsible folks. Period. Some folks tend to want to “over-borrow”. Not on my watch! That is where I come in to guide my clients and help them plan. I conduct detailed analysis and we work together on longer term goals, not just the ones your facing now. There are ways to use your mortgage to your advantage. To build longer term wealth, and equity. That is what I help my clients with. Let’s do this the right way! It really is a simple process and I am honored to help you through! Read more on funding home improvement projects with little to no cash out of pocket!
Regarding my friends at Pickle and Board, my gosh you follow their feed and want all the pretty spaces they highlight. Who wouldn’t want to spruce up and create some improvements? Afterall, they are the go-to design studio here locally that will deliver a plan and bring your vision together!
If we all had 50k in spare funds, I may not have been asked to share these options with you. Many homeowners, less than 33%, do not have the cash on hand for home repairs and improvements. Even the folks that do have the funds oftentimes decide it makes more sense to borrow the funds affording them the ability to SAVE their liquid cash. Financing the project is often a choice for both situations, it could be a win-win! With a good plan, and the right team, your dream home may be in your budget, and better yet, you will most likely increase your home’s value, while potentially saving money every month!
WHAT IS EQUITY POSITION AND HOW DO I USE IT TO MY ADVANTAGE?
Equity position is the current value of your home in today’s market, compared to what you owe on your loan. The difference between the two figures is equity. When you bought your home, you may have put 20% down (or less). There are guidelines to how much equity you need and the advantage to these guidelines is: once you have enough equity you can use the leftover and receive it as cash. In many cases, I am helping folks who want to do a Kitchen remodel or create a master suite or addition. They have owned their home for some time and have been all the while paying down the loans Principle Balance. When you do a cash out refinance, you’re paying off your “old mortgage” and creating a “new one” with the money you need for renovations along with closing costs added to what you already owe. In many cases, my clients didn’t put 20% down when they bought the home and they have mortgage insurance, so I can often remove mortgage insurance, and/or reduce their interest rate so the impact to the monthly payment may be minimal or even DECREASE!
HOW DO I QUALIFY FOR A CASH OUT REFINANCE?
All the factors that go into purchasing a home are considered when refinancing a home. Your job stability, credit worthiness, and Loan to Value are all looked at along with many other factors that conclude that you can repay the mortgage.
WHAT IS A HELOC?
A Home Equity line of Credit also known as a HELOC is an additional (second) mortgage attached to the one you already have. It uses a portion of your equity and creates a revolving line of credit. It uses similar qualifiers, but often the terms are less appealing than a cash out refinance if you are staying in your home for more than five years or have room for improvements on your existing mortgage interest rate, or if you have that annoying and often expensive Mortgage Insurance we talked about. There are several ways to calculate which makes more sense, but it is always specific to your goals.
**This may be a good time to mention that in our current state of the world economy, in response to the pandemic, some lenders are not able to offer all of their programs or have tightened qualifications and guidelines. Any questions you may have on how your current situation in relation to COVID-19 may impact your borrowing power, please feel free to reach out.
WHAT ABOUT RENOVATION LOANS?
There are several options for renovation loans, the most popular is the FHA 203k. There are even two types of those loans! One is called a streamline and the other a Full 203k. They are differentiated by the cost of the project, and the type of work being done. This again is where my team and I come in and explore what is the best fit for you and your project.
Real Estate is still one of the best ways to build wealth. All the while creating a home full of memories, and a safe haven to call your own. I find that with inventory being so low, more and more folks are deciding to stay put and make their home the absolute best it can be! Smart choice in my opinion! If you have any questions on how to improve your home through a home loan, I am a call or message away! Stay Safe!
Home Love. Live Life.
Jennifer Nunes
Sr. Mortgage Advisor- Province Mortgage Associates RI, MA
NMLS 1073297
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