A common question that most homeowners ask themselves is should we remodel or refinance? People often use the equity from their homes to make that difficult decision. There are two ways to go about obtaining equity. You can do it through an equity loan based on its current appraised value, or you can try to apply for a construction loan.
Both options are quite similar. They are both second mortgage loans. Most times, second mortgages will carry a higher rate than your first mortgage did. If you choose to take an equity or construction loan, your rate might be higher than a first mortgage refinance. Many lenders offer a mortgage refinance that will do both.
When applying to a mortgage company you should be prepared to answer a lot of questions. Some of these questions will include how much equity you already have in your home and why you are refinancing?
Refinancing is a big decision, however many homeowners are making that decision, so they can stay in their homes, and still be able to afford to make improvements. It’s very important to think about why you will be making such improvements to your home. Will this improvement increase the value of your home? Remember when you’re refinancing to borrow more money that you’ll need to pay off your existing mortgage. This will help you to afford any improvements which might need to be done to your home. The interest paid on your equity loan or home mortgage is also tax deductible.
There are quite a few incentives to making improvements such as tax breaks for homeowners. Some of which include Bathroom remodels or even finishing a basement. During a remodel you need to pay careful attention to your costs to make sure that you are not spending beyond your means. Avoid making any changes to the remodel after it has already begun. Any late changes can cause additional costs as well as delays in the project.