How To Finance Your Renovations
Do you want to renovate your home but you realize that it would cost more than what you expected
?
It's a fact that "scope creep" is usually what home renovations have. Sometimes, when renovations start and progress, new problems are discovered and in the ending up with more work than predicted. Since this is hard to deal with as funds are often limited, building contingencies into your financing plans is a good idea. One benefit of this is being prepared for the problems that tend to pop up.
You need to consider 2 candidates when you think about renovation financing. The home equity loan and home owner's line of credit are the 2 candidates. For home equity loan, the amount of equity that you've built up in your home is what this is based from. Sometimes, a second mortgage is what this loan is referred to. If you want to calculate this, you need to take the value of your home and subtract the outstanding amount left on the original mortgage. Remember that if you own your home outright, then the value of the home would be your amount. If your home is worth $250,000 and you've already paid 110,000, your accumulated equity would then be $140,000. The loan is guaranteed by the property value so the interest rate and payments are low. For such loans, securing fixed interest rates is also normal.
The homeowner's line of credit is also a popular financing option. This loan doesn't have finite amount except for the limit that's again decided by your equity. This allows for a lot of room when considering costs, making it a popular option. Operating like a credit card, this loan also comes with a variable interest rate. Besides being the most flexible option, this loan doesn't have a definite end date. As long as you need it and don't close it out, the line of credit remains open.
If you want to discern the type of loan that will suit your needs, then you must confer with a banker or financial expert. What you need to do is find a loan that's made for you and prioritize your needs. It's important to plan your payment schedule carefully because your home will be on the line as collateral. Through research, find out what your options are and what works for you and your budget.
by: Kay Ayers
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