We all want to have the best and latest version of everything. From phones to appliances, shiny new things have an appeal of their own. Of course, the same cannot apply to everything we purchase. Most of the expensive items that we purchase are bought keeping their long term applications in mind. A house is one such purchase.
Suppose you bought a house a while back, but now everything looks a bit dated. The novelty of owning your own house has worn off, and you're seeing lots of problems. Maybe your needs have changed, and you're looking to freshen things up a bit. The designer in you longs to carry out this project.
Unfortunately, as is the case with most things, home renovations cost money. You just don't have the kind of cash needed to carry out this project. Therefore, you go to bed each night dreaming of what your house will look like when you finally have the funds.Verify my mortgage eligibility (Feb 22nd, 2024)
You may not need to wait a lifetime to turn your dreams into a reality. Home improvements can be funded with refinancing! So, let's take a look at what a refinance loan is, and whether or not it's a good idea for you to do it.
What is Refinancing?
Most of us don't have immediate access to the kind of funds needed to buy a house. This is why a large percentage of people secure a mortgage. The mortgage loan industry is thriving as a result. A mortgage is simply a loan acquired to purchase a home. It has terms that include the interest rate, the length of the loan, and the schedule of payments.
Refinancing, simply means that you wish to alter the terms of this loan. You may wish to do this for several reasons. When you secure a mortgage, the lender evaluates your financial position. As time passes, your financial position may improve. If this happens, you become more credit worthy, meaning lenders are willing to offer you more favorable terms. An improved credit score, is one of the main reasons you may wish to seek a refinance loan.Verify my mortgage eligibility (Feb 22nd, 2024)
It's also possible that the financial climate has changed significantly since you took out your mortgage. If interest rates are much lower than they were when you initially secured your mortgage, you may wish to capitalize and seek refinancing.
Pros of Refinancing for Home Improvements
There are several benefits of refinancing for home renovations. Let's take a look at the most appealing ones.
1. Capitalize on Improved Financial Climate
As discussed previously, a refinance loan for home improvement can significantly lower your monthly payments. That is, if the financial climate is favorable. Interest rates change to reflect the economy's health, and the government's agenda. If borrowing is being encouraged, lenders will offer much lower rates than you are typically used to.Verify my mortgage eligibility (Feb 22nd, 2024)
You can take advantage of this, by securing a refinance loan with home improvements built in. Doing so offers double the benefits. The first one is obvious, lower interest rates. This can allow you to reduce your monthly payments considerably. The second one is that when you refinance, you can borrow the sum to pay off the previous mortgage, and add a sum on top of that against the equity you have in your home. This extra cash can be used to finance the home improvements you've been dying to make.
2. Improvements are Cheaper than Purchasing
With COVID'19 in full swing, the housing market has become difficult to navigate for a lot of people. People looking to purchase homes find themselves priced out of the market. If you're among such individuals, it may be cheaper to simply refinance and improve the home you have currently. Of course, it's not going to be a new home. Though, given the situation, it may be good enough to have something as good as new.
You can make your living space as comfortable as a new home by making the right adjustments. In doing so, you may realize that the best house was the one you're living in all along.Verify my mortgage eligibility (Feb 22nd, 2024)
3. Increase Curb Appeal
Renovating your home through a refinance loan can significantly increase its value. Of course, you would have to make clever improvements, rather than whatever comes to mind. The added value can come in handy when you finally decide to sell your home. The increased curb appeal is a bonus for you in a way, because you get to enjoy the benefit of the improvements until you decide to sell.
When and if it's time to sell, you'll see that the offers you get are much better than what you would have gotten otherwise.
Cons of Refinancing for Home Improvements
There are certain cons that you should consider as well.Verify my mortgage eligibility (Feb 22nd, 2024)
1. You'll Be In Debt for Longer
When you refinance, you're essentially borrowing money to terminate your current mortgage and taking on a new one. Now, while the new one might be on more favorable terms, it's still going to go on for longer than the initial one. That means that you'll pay more money in the long run.
2. Terms May Not Be Favorable
Part of your due diligence when taking out a refinance loan is ensuring that the terms are actually more favorable for you, both now and in the long term. You should know exactly what you're getting your future self into when entering this kind of financial agreement. At CMS Mortgage Solutions Inc., our team of experts can help you decipher the various particulars of each offer, so you can make the best decision.
Any financial decision requires thorough consideration. Especially when it comes to agreements that leverage your home, such as a refinance loan. Don't fly into one blindly, consult a specialist at CMS Mortgage Solutions Inc. today!Show me today's rates (Feb 22nd, 2024)