If your current house is in a great location, choosing to remodel instead of buying new might make the most sense. Home renovation financing offers a lot of options. Shop around and you can find a way to invest in your home that won’t leave your wallet empty.
Home remodel financing options
You might choose to use your house as collateral for funding your improvements. Some of the more familiar funding methods include:
- Refinancing your existing mortgage If you haven’t refinanced your home in a number of years, you might be able to lower your monthly mortgage payment and take advantage of a lower interest rate and have money left over for your remodeling
- Home equity loan or second home loan Sometimes taking out a second home loan or home equity loan makes sense. This only works if the amount you currently owe is less than the value of your home.
- Home equity line of credit (HELOC) This method of financing can be useful if you want the flexibility to take out money at different times, perhaps for a variety of expenses such as funding your child’s college and putting on a new roof.
Other financing methods that homeowner have used to finance their home renovation projects include:
- Construction or renovation loans for larger projects
- FHA 203(k) mortgage or an FHA Title 1 loan are federally backed loans and can help if you are purchasing a fixer-upper, and need to do some serious rehabilitation. There are limitations and requirements, but these can be extremely useful especially if other lenders are hesitant to loan money on an uninhabitable structure.
- Energy-efficient mortgages (EEMs) can help homeowners obtain energy efficient improvements with their FHA-insurance mortgage.
- Security backed lines of credit (SBL) You might be able to tap into the potential of your investment portfolio to fund your home renovation. Security-based financing can be used for more than just remodeling, talk with your investment advisor or another financial expert to see if this might be right for you.
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