Use a Renovation Loan to Refinance and Upgrade Your Home

As much as you may love your home, you probably can find at least a few things you'd like to upgrade. Some of these home improvements can be done inexpensively and on a weekend. Some of them...not so much. If the projects you'd like to do exceed your time, money and skill set then hiring a professional is probably the next step. But how do you pay for it? That's where a renovation loan can help.

A renovation loan is a mortgage that allows you to roll the cost of remodeling into the same house payments you're making now. It's different from a home equity line of credit (HELOC) in a couple of ways. First, a renovation loan is not a second mortgage. You don't have to worry about which one to pay off first, or another lien on your home if you decide to refinance in the future. Also, the renovation mortgage is based on the after-improved value of the home once the work is completed. A HELOC is based on the current equity of your house.

Here's a look at a few ideas of home upgrades you could finance with this option:

• Replacement windows for better energy costs
• New furnace (possibly even new technology like geo-thermal)
• Kitchen remodel (including new appliances)
• Replace old plumbing with the latest technology
• Add a bathroom
• Fix your roof
• Build a deck
• Fix or build a screened-in porch or 3-season room
• Replace old carpet, tile or linoleum
• Waterproof a lower level (basement)

Those are just a few projects you can pay for by refinancing your mortgage into a renovation loan. The great thing is that the interest paid on this is the same as your mortgage interest. It's a fixed interest rate, and the rates right now are extremely low.

You can learn more about how a renovation loan might help you refinance and remodel with "The Complete Guide to Spring Home Improvement Financing." The free guide at the button below covers all kinds of renovation financing information, as well as several DIY ideas to spruce up your home for spring.

(kitchen remodel: Flickr user mlitty)