Dave Moore Companies

Building The Mid-South For Over Twenty Years

How to Finanace Your Home Renovations

Loan Resources

How to Pay for a Home Renovation

Cash-out refinance
This option takes advantage of the equity you have built up in your home by refinancing your current mortgage for one larger than your current balance and taking out the difference in cash. For example, say your home is worth $250,000 and you still owe $150,000 – you have $100,000 in equity that you could use to finance your renovation. Cash-out refinancing often has attractive interest rates, but refinancing costs can be expensive, so do the math.

Home equity loan
A home equity loan is a second mortgage on the available equity in your home. The interest and term are generally fixed, but the interest is usually higher than a first mortgage, and the term shorter. On the other hand, there are often fewer fees and closing costs. You get the entire loan amount in one lump sum, which can be useful if you are paying a contractor.

Home equity line of credit
Think of a home equity line of credit as a credit card tied to your home’s equity. This is the most flexible of home equity options. Once the lender has approved your line of credit, you can access it through either checks or a credit card. You only borrow what you need at any given moment – perfect for making purchases at the home improvement store or paying contractors in stages. Pay back what you’ve borrowed either all at once or in a small monthly payment – an advantage if cash-flow is an issue. Typically, the interest rates for lines of credit are variable, but some lenders allow you to fix the rate on a certain portion of the line of credit.

With all three options – cash-out refinancing, home equity loan and line of credit – interest payments are usually tax deductible. Check with your tax advisor about your personal situation.

Personal loan or line of credit
This is an option if you have limited equity in your home and your project is fairly small. Interest rates are generally higher than home equity options and interest may not be tax deductible. However, a personal loan or line of credit usually carries fewer fees.


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