Every home at some point is going to need a renovation. Whether you are replacing roof shingles, updating your kitchen, or building a whole addition, home improvements are rarely cheap and most people don’t have enough cash on hand to pay for them outright. Fortunately, there are a number of ways a mortgage loan can help you pay for your renovation.
The following are three types of loans that make use of your home equity and that can help pay for your home improvements.
1. Home Equity Line of Credit (HELOC)
In most cases, you can borrow up to 80% of the equity in your home using a HELOC. Say for example, your home is worth $250,000 and you still owe $150,000 on it. That means you have $100,000 in equity and would be able to borrow up to $80,000 with a HELOC.
2. Refinance Your Mortgage
Another way that you can access the equity in your home to pay for a home improvement is to refinance your mortgage. To do this, you will have to break your current mortgage and get a new one for a higher amount. The difference between the full amount of the mortgage and what you actually owe on the home is given to you in cash, which you may use in any manner you choose – in this case to fund your home renovations.
3. Get a Second Mortgage
The third way that you can access the equity in your home for home improvements is to get a second mortgage. Unlike refinancing, this option does not require you to break your first mortgage (which may make more sense if you have recently renewed your first mortgage). The interest rates on second mortgages tend to be higher than first mortgages however they will still be considerably less than unsecured loans such as credit cards. One of the great things about all of these options is that if you have equity in your home, you do not have to have perfect credit to get a loan. The mortgage loan option that is best for you will depend on a number of factors so it is best to have a mortgage professional review your situation and recommend the best course of action. If you are considering a mortgage to pay for your home renovations, contact Akal Mortgages today. A member of our team would be happy to help!
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