Keeping up with home maintenance can be challenging. Even if you stay on top of repairs, homes naturally wear down over time, sometimes leading to bigger, more expensive renovations later on. Take the average bathroom, for example—it usually needs to be updated or replaced after about 7 to 10 years. But tackling a major renovation like that can come with a hefty price tag. So, what are your options as a homeowner?
Refinance with a home equity loan.
If you cannot save up for the significant remodels your home may require, another option is to refinance your mortgage to access additional funding. A home equity loan can allow you to tap into your home’s equity to fund home improvements. Some of the advantages of a home equity loan are:
- Payment Structure: With a home equity loan, you can get a lump sum of money upfront to fund your renovations. This sum is then bundled into your remaining mortgage payment structure so you can pay it off with your remaining mortgage over your amortization period.
- Better loan terms: Another advantage of refinancing with a home equity loan is that you may get a better mortgage with a lower interest rate or a more beneficial loan term that better fits your financial goals. For example, you can switch from a variable to a fixed-rate loan for more predictable payments. It all depends on how much equity you have, the value of your home, and the current market conditions.
Home equity line of credit
Another option to access your home equity for financing is to use a home equity line of credit or HELOC. Like a home equity loan, this option allows you to utilize the equity you’ve built from owning your home. But unlike a loan, this option is a line of credit that will enable you to draw funds as needed, much like a credit card. This option may be an excellent fit for ongoing minor repairs or maintenance costs you may encounter as a homeowner.
Don’t be afraid to refinance
Refinancing your mortgage can feel daunting, especially in the current real estate market. However, it can be a strategic financial tool for homeowners, especially when funding renovation costs. To see what refinancing options you may have as a homeowner, book an appointment with your local loan advisor. They can help you determine what options are available and if now is a good time to refinance.
*When it comes to refinancing your home loan, you can generally reduce your monthly payment amount; however, total finance charges may be higher over the life of your loan.
