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Remember the feeling you had when you first got the keys to your home? You walked in the door with big plans for giving the kitchen a face-lift, or refinishing the basement one day. But as time passed (and bills kept piling up), your dream home renovations quickly took a backseat.
The good news is, over time you’ve also been building up equity in your home – and it can be a valuable asset. Low interest rates present homeowners a healthy opportunity to refinance their mortgage, which can be helpful in lowering monthly mortgage payments or accessing extra cash by borrowing against the equity in your home.
Refinancing is a solid option for funding major renovations as it allows you to spread repayment over an extended period of time while taking advantage of low interest rates (which are much more reasonable than credit card or personal loan rates).
Homeowners can borrow up to 80% of your home’s appraised value (minus any outstanding mortgage balance). One of the key advantages to refinancing is to secure a lower mortgage rate, which reduces the overall cost of your loan and saves you money in the long term. In fact, you could be in a position where refinancing allows you to access funds for home repairs without resulting in any increase in your mortgage payment.
Here are three tips to keep in mind when taking advantage of the refinancing option to pay for home renovations and repairs:
It’s important that you read the fine print and look closely at the interest rate and fees. While a lender’s interest rate may be low, the fees could be excessive. This is why it pays to work closely with a mortgage broker you trust, someone who will explain all of your options and negotiate the best terms on your behalf.
Refinancing also presents the opportunity to rid yourself of private mortgage insurnace premiums once and for all. If you didn’t contribute at least a 20% down payment when the mortgage was initially taken out, you would have been stuck paying PMI, resulting in a higher mortgage payment. But as your mortgage balance decreases and the property values increase, it’s possible that the PMI could be eliminated, therefore further reducing your monthly payments.
Renovations can be a wise investment if done strategically. When determining whether borrowing against your home’s equity to fund your renovation makes sense for you, consider how the renovations will add value to your home.
Still wondering if refinancing is the right option for you? Learn more about how the refinancing process works here. Or connect with us through our no-obligation online application, and we’ll get back to you right away to walk you through your options.
If you have a comment about this blog post, have questions about the different mortgage types we provide or wish to ask any other questions about how to get a mortgage from CVE Mortgage Group, please feel free to contact us