It’s DIY season – the time of year we roll up the sleeves and tackle those much-anticipated home improvement projects we fantasized about all winter long. Renovations and remodeling are the best way to transform a space for the better and offer significant upside by adding some serious value to a home.
Turning a home renovation dream into reality, especially a fixer upper, though, will involve a financial investment – a tough pill to swallow if you do not have money saved up and readily available. On average, a homeowner will spend nearly $47,000 on home renovation costs, with the exact dollar amount fluctuating based on the room(s) being updated, square footage, cost of materials and labor and the region you reside in.
THE AVERAGE COST OF HOME RENOVATIONS AND REMODELING PROJECTS IS $46,713.
Now, a route many people – one in three homeowners, according to a 2018 study – will take is using credit cards to charge for home improvements. While it may make financial sense in the short term, especially if you have credit card reward programs, instead, you could end up paying more in the long run with fees and high interest rates. Higher monthly credit card bills could take a toll on your credit score and affect your overall financial health.
So, if do not have money on hand or credit cards are not a viable option, how do successfully finance a home project without sinking into debt?
INTRODUCING CASH-OUT REFINANCE
Consider a cash-out refinance as an affordable way to make home improvements when funds aren’t readily available. Simply put, cash-out refinancing is when you swap your current home loan with a new mortgage – potentially at a lower interest rate and with favorable terms – that includes a higher loan balance and any closing costs carried over. The new loan amount is calculated based on how much equity you’ve built in your home over the course of the mortgage.
Take care of those long-awaited home repairs or bring your dream kitchen to life without breaking the bank and having to sacrifice your monthly budget. Home improvements, including expensive, large-scale projects, are within reach with a cash-out refinance.
HOW DOES CASH-OUT REFINANCING WORK?
For example, let’s say your current home value is $250,000 and your loan outstanding balance is $100,000. That gives you $150,000 in equity or 40 percent of value of the home. However, you cannot use all of your equity as cash at once. There are limits with cash-out refinancing. Typically, lenders will allow a homeowner to cash out 80-90 percent of a home’s equity. In this case, you would receive a check for $100,000 at closing.
Just like any other refinance, closing costs are involved and may be subtracted from your cash balance – meaning you won’t have to pay anything out of pocket.
Interested in a cash-out refinance? Discover how much money you could save by refinancing your home loan with Union Home Mortgage. Click here to use our refinance calculator and see your new monthly balance right now.
CASH-OUT REFINANCE ADVANTAGES
LOWER INTEREST RATE
You may be able to take advantage of a lower interest rate or shorten the term of your loan.
INCREASE HOME VALUE
Invest in home repairs or improvement projects to increase the value of your home.
Improving your home will enhance the living experience and boost your home’s equity and property value.
When you cash-out refinance, you get to take advantage of your home’s equity and turn it into money. While you can invest the money back into your home and increase its value, the opportunity is there to use it to pay off high-interest debt, such as credit card bills, car payments and student loans.
READY TO UPGRADE YOUR HOME?
If you want to invest in your home without racking up debt, cash-out refinance may be your best option. Speak with Union Home Mortgage today and explore refinancing options and discover how much money is in your home and available to you. As your trusted cash-out refinance lender, Union Home Mortgage matches you with the best loan at the lowest rate.