Spring is right around the corner and probably like you, I look to my home to see what I can do to maintain or update the value….being a Realtor, I should be paying attention, right? This month, I had the interior repainted, it cost about $4000.00. I had a great painter and am super happy with the results-they went the extra mile, even putting up new drapery rods for me (if you need a painter recommendation, call me)
There are some good Home improvement loans that can help you finance your improvements. However…..slow down…., lol….not all improvements will get you top dollar when you go to sell, so please call me and let’s discuss before you do spend those funds. Last year, a client of mine did some very expensive updates. I really wish they had called in advance because they missed the mark on the best places to spend those funds.
You know you can finance those updates….one is a personal loan, not generally collateralized by the home itself. This is considered a higher risk loan and your interest rates could reflect that risk by being higher than other mortgage loans.
Your credit score will also be a factor and we are seeing rates between 6 and over 30% for those rates, so do shop around. I
Also the length of that loan will be shorter than your 15 or 30 year loan- it can be around 7 years…..
Ask your lender about doing a ‘cash out refinance’ loan. That means the lender will use your home as collateral, you will need to have about 20% equity in the home to do this….(some lenders may not ask for that much….again, speak with your lender(s)
And remember you may be financing those improvements for 30 years instead of a shorter term. It could be a smaller payment and if you don’t plan on staying in the home for more than ‘x’ amount of years, it could work out for you. Crunch the numbers though. If you are paying over 4% on interest you might be able to refi at the same time and benefit from a lower interest rate, depending on what the current rates are.
Here’s an example, you borrow $250,000 at 4.5% for 30 years your current payment is $1,266.71. After 54 payments, the unpaid balance is $230,335. If you did a cash out refinance at 4.5% for 30 years for the additional $50,000 and don’t forget, you will probably finance those (estimated) closing costs of approximately $8,700, the new payment would be $1,464.50.
Using the home improvement loan, the combined payments would be $2,149.35 which would be $684.85 higher. While the cash out refinance produces a lower payment, it adds $8,700 to the amount owed and stretches it out over a longer period. Home improvement loans have lower closing costs than regular mortgage loans.
You might also consider a HELOC aka a Home Equity Line of Credit , ask your lender to show all examples. If you are going to finance improvements, a comparison of different types of loans and payments is super helpful- so take your time….really source this out, talk to two lenders to see who can offer you the best options.
We work with several lenders and would be happy to share their names or, you could speak to your credit union, byou ank or ask your friends.
When you are ready to sell (or buy) call me and lets talk
Sharon@SharonLewishomes.com Fathom Realty