Why Take On a Refinance Mortgage for Home Improvements?
A refinance mortgage may seem like a lot of work for home improvement financing. And it can be. But it can also be a great option, depending on what kind of work you're paying for. For instance, a new kitchen complete with new free-standing appliances is probably beyond your budget. I wouldn't be able to pay cash for it. And I wouldn't want to charge it on my Visa at 18% interest. In this case, refinancing my house and paying for the upgrades seems like a solid choice.
Did you know the FHA 203k can be a refinance mortgage? It's not just for new purchases. You can actually pay off your existing mortgage with the 203k, including home improvements and renovations in the new mortgage. This means homeowners like you have the opportunity to pay for upgrades you've been wanting to make, turning your house into your dream home.
New kitchen? Sure. Additional bathroom? You bet. Driveway repair? Yep. Many repairs and home improvements are eligible for financing with a refinance mortgage. Some of the only things not possible are luxury items (in-ground pool, tennis courts, spa) or do-it-yourself projects.
But refinancing my house is a lot of work and it's not a good market. I have no equity.
First of all, any kind home improvements and financing will be at least some work. More than likely it'll be a lot of work. So a refinance mortgage is simply part of that process. Now, as to the equity issue: the point of this home improvement loan is to create equity in your home. The loan is actually based on the after-improved value of the house once the work is done. In other words, you don't need current equity like you do with a traditional HELOC.
Because you're refinancing your house, there will be some added costs including a 3.5% down payment. That's the FHA standard. But that down payment is less than covering the costs yourself, and it allows you to roll the financing all into one mortgage payment with the same low interest rate as your house.
Learn more about the refinance mortgage option for upgrading with "The Complete Guide to Spring Home Improvement Financing." The free guide covers DIY work you can do in a weekend or two, plus more in-depth remodeling ideas where you might need some financing. Get your free copy at the button below.
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