Home repairs and renovations are sometimes essential, sometimes unforeseen, and sometimes carefully and strategically planned to improve your home and increase its value. Renovations and repairs don’t come cheap; however, they are a good use of your money as they will increase your home’s value.
A common way that homeowners afford repairs and renovations is by refinancing their current mortgage. Refinancing a mortgage is usually better for your bank account than taking out a loan or a line of credit. However, refinancing is a big step, and before you go ahead with it, you’ll want to make sure it’s the right solution for you and your situation.
Refinancing is a process that pays off your existing mortgage and creates a new one. Since you would be using the funds to pay for renovations or repairs, you would be trading in your current mortgage for a larger mortgage in order to receive a sum of cash.
This kind of refinancing allows homeowners to access their home equity, which is the value of the home minus any mortgage or liens. There are pros and cons to refinancing. Yes, you can receive cash in order to finance your renovations, but you will still need to repay the new loan.
While refinancing may feel like “free” money at the time, it’s important to remember that it will all have to be paid back eventually. There are also closing costs and fees associated with refinancing. You should only refinance if you’re certain it’s the best option for your situation, and consider consulting a mortgage professional for guidance. A refinanced mortgage isn’t something you can continually draw upon; it should only be done when necessary.
Other ways to finance a home repair or renovation include using savings or taking out a personal loan or line of credit. You may also qualify for government home improvement rebates or tax returns.
While refinancing can be risky, it is often a better solution than taking a personal loan out. Ultimately, you’re taking money out of your home and putting it back in, raising the value of your home. Just be prepared to have to repay a potentially larger loan than the one you previously had. As with all decisions related to your mortgage, refinancing should never be taken lightly, be seen as a cash supply, and should be consulted upon with a professional.
To see if refinancing may be a good solution for you, contact our mortgage professionals today!