The benefits of refinancing: use equity to make home improvements

 Did you know that about 50% of home equity loans are used to remodel homes, according to the US Census Bureau’s Housing Survey?

Home improvements seems to be a very popular option when people apply for a home equity loan.

An equity home loan is when the bank lend you money against the portion of the house that you own. As an example, if your home is worth $350.000 and your mortgage is for $250.000, you have built about $100.000 in equity on your home or, in other words, you own $100.000 of that house. To invest money in your house is a good option because home improvements tend to increase your home´s value. And the higher the home´s value is…the higher the equity is too.

A risk you face when using an equity home loan for remodeling is when the market goes down and the value on your home is less than you paid for it. In this case you end up with no equity or even negative equity. So it is important that the housing market goes up when you decide to loan money to remodel your home.

When the market goes up, making a bigger down payment will increase equity as well. For example, if you are buying a house for $200.000 and your down payment is 20%, then you have $40.000 in equity at the moment you start paying your mortgage. Let´s assume that your home increases its value by 10% the next day after you buy it, then you earn $20.000 more. At this point you might have $60.000 in equity to support your home loan equity.

Thinking about refinancing? Let us help you get it right. Contact us here or call as at: 1-866-200-5250.  

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