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When you live in a place, you want to be comfortable. Sometimes, though, your house just no longer fits the bill. Maybe your family needs have changed. Perhaps there are uncomfortable and outdated features in your home. Whatever the reason, you might feel it’s time to renovate your home.
But making changes to your home can be expensive. Even just updating a kitchen or swapping out all your bathroom fixtures can be costly. Paying for it can be difficult, especially if you don’t have access to immediate capital.
One way to pay for renovations is to look at the home itself. Your house is your most valuable asset and unlocking that value can be key to getting the money you need to pay for upgrades and changes. Here’s what you need to know about making renovations using home equity.
When you own a home, you build equity by making mortgage payments. Additionally, as home values increase, you also end up with more equity. This equity, or value, in your home is determined by subtracting what you still owe on your home from its market value. So, if your home is worth $250,000 and you still have a balance of $130,000 on your mortgage, you have $120,000 equity in your home.
Getting access to some of that equity could go a long way toward helping you reach your goals. There are two main ways to access the value you’ve built up in your home:
Both of these types of home equity have their pros and cons. For example, a second mortgage is less likely to rely on your credit score. Instead, the amount of equity you have matters more, so it’s possible to get a second mortgage even if you have poor credit.
On the other hand, a home equity line of credit is more flexible, but lenders put more emphasis on your credit score. Additionally, you’ll have to be able to demonstrate the ability to repay a home equity line of credit for renovations.
However, even with the stricter criteria, a line of credit can be a good idea for home renovations.
When you start making home renovations, it’s difficult to accurately figure out how much money you’ll need — and when you’ll need it. One common issue is that once you start renovations, they often cost a little more than you thought. On the other hand, though, you might also discover that you don’t need quite as much as you thought.
The main advantage of the home equity line of credit is that you can get the money as you need it. If you don’t need as much right now, you don’t have to take the whole loan amount — and pay interest on it. Instead, you take the money as needed. This reduces the overall interest you pay, since you aren’t paying the same amount throughout the entire project.
And, if you do need more money, you can borrow it without re-applying. If you get a $20,000 second mortgage, but later realize that you need another $10,000 to complete the project, you have to re-apply. And you don’t know if you you’ll get that other loan. However, if you’ve established a $50,000 home equity line of credit, you don’t have to worry about applying for more funds. You just get what you need from your line of credit.
The great thing about a home equity line of credit is that you only pay on what you owe so you can keep your costs to a minimum. Likewise, Secondmortgage.ca can help you save even more by getting you preferred rates with flexible terms.
To sum up, we deal in challenging mortgage financing and work with homeowners that other banks will not consider helping because of weaker credit scores and unconventional income sources. Put Secondmortgage.ca to work for you and let us help make your home your dream home with a free consultation at 1-866-306-2637 or apply online and let us get working on your approval today!
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