Home Equity Loans The Best 2nd Mortgage for Financing Home Improvements
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Home Equity Loans: The Best Choice for Financing Home Improvements
Are you tired of your outdated kitchen appliances or that worn-out fiberglass tub in the guest bathroom? Home improvement projects are becoming increasingly popular across the country, with homeowners eager to revamp their spaces. While half of these projects are undertaken by homeowners themselves, the other half rely on professional contractors. A common way to fund these renovations is through home equity loans.
Why Consider Renovating?
Before deciding whether to move or stay and remodel, consider this: The American Homeowner Foundation estimates that the cost of moving can total at least 10% of your home's current value. If you can achieve your desired upgrades for less than this amount, staying and renovating is often the smarter choice.
Financing Your Renovation
If you have sufficient equity built up, a traditional home equity loan might be ideal. With these loans, you often benefit from better interest rates. Plus, they can potentially lower your existing mortgage payment while boosting your home's value.
For DIY enthusiasts tackling smaller projects, a home equity line of credit offers flexibility. This option allows you to draw from a pre-approved credit line based on your home's equity, using checks or a credit card provided by the lender.
Expert Advice
Lori Vella, a senior banking executive, advises ensuring that refinancing makes financial sense. "Improving your home is almost always a smart investment, especially in the current rate environment. Just make sure you'll be in the home long enough to recoup the cost of refinancing," Vella states.
Return on Investment
A 2004 survey by Remodeling Magazine evaluated construction costs against potential returns upon resale. Results showed that minor kitchen remodels offered a 92.9% return on investment, closely followed by new siding at 92.8%. Other lucrative projects included bathroom remodels, attic bedrooms, deck additions, and family room extensions, with returns ranging from 80% to 90%.
Renovating your home not only enhances its value but financially, a home equity loan can lower your mortgage payment and interest rate, ultimately adding thousands to your net worth.
Additional Tips
If you're interested in improving your home's energy efficiency, check with your local utility company about energy-efficient mortgage programs they may offer.
For those eyeing fixer-upper properties, consider HUD's 203(k) program. This initiative allows you to finance both the purchase of the home and the renovation costs under one convenient mortgage, available through most lenders.
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By leveraging the right financial tools, you can transform your home to better suit your needs and increase its value, making home equity loans a top choice for financing your renovations.
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