Whether you’re renovating for style or repair, making changes to your home is exciting –and daunting! Planning what to upgrade, where to purchase the supplies, who to trust to do the work are just some of the daunting tasks involved.
But there’s one other detail that needs to be figured out before anything else: how to finance the renovation.
The cost of renovation varies quite a bit, but generally speaking, we’re talking a few thousand.
As in most situations, saving for a big project is ideal, but it’s not always possible. You may be able to crowdsource some of the funding by asking your parents for help or possibly asking friends and family for cash gifts for your wedding or birthday. But it’s unlikely to be enough to finance your home makeover.
For a more sure way to get the money you need to repair or upgrade your home, consider these home loan options.
How To Fund Your Home Renovation
This method is one of the most popular ways to fund many things, including home renovations. Similar to a savings, your home equity is a stash that you can tap into when it makes sense. What’s even better is that refinancing into another loan may also lower your monthly payment or otherwise save you money. There’s also more than one type of refi program. So depending on your credit and other qualifying factors, funding your project with a new home loan may not change your monthly payment at all!
The key here is that it “makes sense” for your loan and financial situation. To see if this is the right choice for you, please contact Tara Mortgage Services.
2. Get a HELOC
If your interest is already low or maybe you’ve already paid off your loan and rather not refi, then consider a HELOC. A Home Equity Line of Credit is a way to access your equity without refinancing. Similar to a credit card, you “borrow” money against your home as needed. Unlike a regular credit card, the interest rates are much lower. One thing to note is that a HELOC is usually an adjustable rate loan. However, fixed-rates HELOC’s are available, too.
Another home loan option that does not require refinancing is a Home Equity Loan. This type of loan requires you to take out the funds all at once, rather than “as needed” in a HELOC. The benefit of this loan is having a lump sum, which may be just what you need for your renovation. You’ll also get the stability of a fixed rate with this type of loan.
Confused as to which loan is best for you? Tara Mortgage Services is here to help! Contact them today for an obligation-free consultation and get on your way to a renovated home at a cost you can afford.
Alex Deacon’s March Real Estate Networking Workshop has been announced, and he’s bringing in two huge guest speakers: Josh Caldwell and Matt Beam! The trio will be discussing Creative Financing Concepts, ideas, laws, etc. Don’t miss out on the most highly anticipated workshop of every year! RSVP below!
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I thought it would be a good time to write about this issue I have right now. I have so many deals in the pipeline, and more coming at me from all directions, that I don’t know when to stop.
I can compare it to an addict with a substance abuse problem. It is very difficult when you have this serious mental condition. Obsessive drive to succeed (and to beat the other person to that real estate deal) can be very frustrating to say the least. I have to keep reminding myself there are only so many hours in the day, and so many days in our lives, and we need to be smart about which deals to chase and which to let go.
If I could give one piece of advice here, I would say don’t over analyze the deals you have in front of you. It might be better to sleep on it and discuss with another trusted advisor before pulling the trigger. The compound effect of small and almost unnoticeable changes every day will, at the end of the year, become a large impact on whatever you do.
If you are losing weight at a rate of 1/4 of a pound lost a week, it will never be noticed by you or anyone. But at the end of the year, you will have lost 13 pounds. It’s no different than building your business and your real estate portfolio: slowly and with more control. By the end of the year, you will make leaps and bounds with a lot of less stress and financial burdens.
Good luck to all of you, and learn when to say NO!
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A second mortgage is a home equity loan or a home equity line of credit, and just like your original mortgage, a second mortgage is secured by your home. Although it may seem counter-intuitive to take out “another loan” on your home, a second mortgage is a way for you to tap into your resources without selling your home.
All About Second Mortgages
The two primary types of second mortgages are home equity loans and home equity lines of credit. One of the main differences between these two home loans is how you receive the money and how you repay it. Just like a traditional loan, a home equity loan gives you a lump sum which you’ll repay at regular intervals over time. Interest rates are typically fixed with a home equity loan.
A home equity line of credit works more like a credit card. And just like a credit card, you use your credit only when you need it. Also, interest is charged only on credit used. Interest rates are typically adjustable with this type of second mortgage.
How To Use a Second Mortgage
Homeowners use their second mortgage for a variety of projects such as to pay for home improvements or repairs, buy a second home or pay off debt. There are some limitations as to what you can use the funds for, but generally speaking, you have many options.
A word of caution, however. While there may not a be a restriction on using the funds for items such as vacations or a lavish shopping spree, we recommend that you don’t use your second mortgage for these expenses. Remember that your home secures the second mortgage, and a tour of Europe, no matter how grand, is not worth risking your home.
The Benefits of Second Mortgages
The biggest advantage is that you get a large amount of money all at once and can use it immediately on pretty much whatever you want. Also, any interest you pay may be tax deductible. Talk your tax adviser for more information.
Possible Disadvantages of Second Mortgages
The primary downside of second mortgages is the inability to repay the loan and losing your home.
Another disadvantage is that there are fees involved, much like there was with your first loan. Also, if your score isn’t all that great, your interest rate will be on the higher end of the spectrum.
How Much Money Can You Get?
The amount depends on how much equity is in your home, your credit score, and the loan-to-value ratio. If the combined loan-to-value ratio of both your first and second mortgage is greater than 75 to 85 percent, it may not be possible to get the second mortgage.N
Where to Get a Second Mortgage
It’s not necessary to get your second mortgage with the lender where you have your first. This is great news because that puts the power back in your hands! You’re not tied down to one lender and you can take advantage of the unique opportunities we offer at our office.
In previous posts, we talked about the current rise in mortgage rates and whether it’s still a good time to buy a home (yes it is!).
This week, we want to focus on refinancing and whether you should consider it in this market. While it may not be the right time to refinance for all homeowners, some situations make it the ideal time to refi. Here are a few scenarios where refinancing your mortgage makes sense even during times of rising rates.
Not sure if you fit these situations? Need personalized answers? Contact Tara Mortgage Services for expert mortgage assistance!
Five Scenarios That Suggest Now Is the Right Time To Refinance
1. Your ARM is due to reset soon
If your adjustable rate mortgage is due to reset within the next year or so, switching loans now could save quite a bit. Whether switching to a fixed-rate mortgage or another ARM, changing your about-to-expire ARM means that your rate is guaranteed for a longer time, despite market fluctuations.
2. You want to consolidate loans
Student loans, medical bills, and credit cards typically have higher interest rates than even the highest mortgage rates. If you are looking save money by consolidating your loans into a lower interest rate mortgage, refinancing can make it happen. You’ll also have the convenience of getting rid of multiple payments. Sometimes the additional cost comes from accidentally missing a payment, resulting in late fees.
3. Your credit improved
If your credit score has increased since you first got your original mortgage, then refinancing could make sense. The best rates and loan programs are often reserved for those with favorable credit scores. So if you weren’t able to qualify for a special home loan program before, you could be eligible now!
Depending on when you first got your loan, there could be new programs now that didn’t exist before. This is often the case in the mortgage industry –new home loan programs are available and eligibility standards adjust as the market and regulations change.
4. Your income has increased
If your income has increased since you last qualified, your debt-to-income ratio has likely also changed. More disposable income with little to no difference in your debt makes you much less of a “credit risk.” And just like the above scenario, you’ll likely qualify for mortgage programs this time around that you didn’t before.
So if you’ve gotten a raise, your spouse has gotten a raise, or if you changed employment where you earn more, then refinancing your current mortgage may be right for you.
5. Your home is located in a “hot market” area
If you live in an area where property values are rising, and you want to use your home equity, then you’ll want to consider a cash-out refinance. Remember that property is an investment and the “earnings” from rising home values is often your best option when you need cash. Use the money to make home improvements, help pay for your children’s college tuition, start up a business, or anything else where a lump sum is needed.
Everyone’s financial situation and goals are different, and truthfully, it may not be in your best interest to refinancing your loan at this time. Contact Tara Mortgage Services today for an honest, fast, and personalized refinancing assessment.
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Paying off debt as soon as possible is always is a good thing –but does that rule also apply to mortgage debt? Is making an extra payment each month to pay off the mortgage early worth it?
In this week’s post, we’ll explore the pros and cons of paying off the mortgage early.
Not a homeowner yet? We can help! Get started the pre-qualification process now using our secure online application.
Pro: Save On Interest
Making an extra payment to the principal balance of your mortgage helps save you money by lowering the amount of interest you pay. Although you can make an additional payment towards your principle at any time, this method is most effective when you first get your loan. This is because the principle is higher at the beginning of the loan. Hence, you are paying more in interest. Making an extra payment will result in saving in interest over time.
Con: Miss Out On Other Investment Opportunities
If you have the extra cash to put toward making an extra payment, that means that you have the extra cash to invest. Instead of trying to save money on your mortgage, you could, instead, making your money work for you. Making additional contributions to your 401(k), especially when you’re 10 years or more away from retiring, can result in significant earnings –sometimes more than what you could save by paying off your mortgage early.
Pro: Peace Of Mind
Reducing monthly expenses brings peace of mind and considering that your mortgage payment is likely your biggest expense, you can start to imagine how good it would feel to eliminate it early. Also, when calculating the cost of living, inflation, and what the average, fixed, retirement income is, getting rid of a housing expense becomes even more attractive.
Con: Prepayment Penalty – Sometimes
Some mortgages carry a prepayment penalty, meaning that you’re limited as to how much you are allowed to pay off and when. Though this may seem unfair, it’s not all bad news. The types of loans that carry prepayment penalties often have lower interest rates or other perks that save you money.
When it comes down to it, deciding to pay off your home loan early is a personalized is not a one-size-fits-all decision. It depends on your ability to pay, the type of loan, how mature your loan is, whether your extra cash would be more useful in other investments, how close you are to retiring, as well as other factors.
Even if you don’t currently own a home, if you plan to pay off your mortgage early, then you’ll want to make sure you choose a home loan that allows for prepayment.
Call Tara Mortgage Services today for expert and personalized home loan guidance, and together we can find a mortgage option that works for you.