Finance Your Home Remodel

Remodeling Your Home

Remodeling your home can be exciting, as well as intimidating.  Improving your home can help you enjoy life more while you passively build equity. From kitchen cabinets to closet doors, there are many different remodeling projects that can add to the value of your home. These projects can be very cost effective or cost quite a lot.

This article offers some tips for financing your remodel. Whether you want to create more space, update your appliances, make your home more energy efficient, build a home office or add a personal touch; there are endless ideas to choose from. To learn more about home values and how you can get the best appraisal, check out The Housing Hour's special on home values with appraiser Tom White.

Remodel Your Home With Equity

There are many different loan programs that allow you to use the equity in your home, to remodel your home. Sounds nice doesn’t it? Whether you hire someone or do the work yourself, you will need to accurately predict the price of the project. Before you get a loan, you will need a specific figure to give to lenders.

The amount of money you can borrow will depend on your credit rating, income and your loan to value ratio, also known as the LTV (Loan To Value). The LTV is a percentage of the lien compared to the appraisal value of the home. Usually, cash out refinances have a max LTV of 80%.  For a $200,000 home, that would be approximately $160,000.

Here is an example:

If your mortgage balance is $40,000 and your home appraises for $200,000, the most you can borrow would be $160,000.  The first $40,000 of the new loan would go to pay off the balance and the additional money would go towards paying your closing cost and your home improvements.

If you have an excellent credit rating, you might get a higher LTV than 80%. Conversely, if you have a less than perfect credit rating you may get a loan with a lower LTV.  Contact MIG for more information and talk to a mortgage advisor near you. 

Listen to this episode of The Housing Hour with Eddie Hops from Cabinet Conversions of Tennessee to get some great ideas for you home renovation.

Remodel Without Using Equity

There are lots of ways to add value to a home without spending a lot. You can still remodel your home without dipping into the equity. You could pay with your savings, and even opt for cheaper fixes. Making regular improvements on your home out of pocket can add value to your investment. This can help you take out lines of credit in the future. Clean out your attic! You may be surprised on how much you can make from a garage sale. Clean out space and get cash to put back into your home, or your pocket. To learn more about the housing market and home values, visit The Housing Hour’s editorial section on their website.