One of the best ways to add value to your home is to make a few simple improvements to your property. Unfortunately, the average renovation can cost as much as $46,812 and that means paying for your home improvements can feel like a challenge. While you can and should use some of your savings to help pay for the project, it’s not the only option at your disposal. You can refinance home your home to pay for your remodeling project. Here’s what you need to know.
You’ll Get a New Loan
When you refinance your home, you’re essentially taking out a new home loan. This allows you to take advantage of lower interest rates and gives you the chance to get a better deal than you had on your original home loan.
Keep in mind that you will have to pay closing fees if you’re taking out a new mortgage. You’ll want to make sure you’re comfortable with those fees before you agree to the terms of the loan.
Evaluate the Interest Rate
If the interest rate you have on your existing loan is already low, you may not want to refinance your home loan. Anytime you refinance your mortgage, you’ll receive loan rates that reflect the current interest rates on the market. If those rates are higher than the one on your existing mortgage, refinancing might not be in your best interest.
Remember, the higher the interest rate is, the more money you’ll pay over the life of your loan and the higher your monthly payments will be. Anytime you refinance, it’s in your best interest to look for loans that will give you the money you need without making your monthly payments higher than you can reasonably afford.
Try to Boost Your Credit Before You Apply
Since refinancing your home loan means taking out a new loan, lenders will need you to meet certain requirements to qualify for the best loan terms. Before you apply for a loan, find out what your credit score is like. If it’s low, try to build it back up by repaying your existing debts as much as possible. The higher your credit score is, the better the terms will be when you refinance your home loan.
If you know which types of renovations you want to make and are sure you’re ready to refinance your home, don’t wait. Apply online or speak with our team to discuss your options and find out how much you’ll be approved for.