5 Indicators You Should Finance Home Improvements Through Equity
Should you use the equity in your home to pay for home improvements? Because you have a variety of choices when it comes to financing your improvements, the best way to make this decision is to know the indicators that this may be the right move. Here are a few such indicators to look for.
1. You Can Get Low Rates
First, what interest rate can you qualify for using home equity? Generally, home equity loans and mortgage loans are great ways to finance larger amounts because they carry lower interest rates than other choices. But each person's credit scores are different, so assess the rates on your particular choices. Equity-based loans are often a clear winner.
2. You're Considering Refinancing
Are you already thinking about refinancing your mortgage? Most Americans refinance at least once during their loan, usually to capture lower rates or to change the terms. If you plan to refinance, turning it into a cash-out refinance and using the excess money for improvements keeps things simple and cost-effective.
3. The Improvements Add Value
One reason why it's a good idea to use equity for changes to the home is that it uses money from the home to build more value in the home. Calculate your planned changes and determine if they will boost the overall value of the property. If so, this not only makes the property a better investment but also frees up even more equity through higher valuation.
4. Repairs Really Need to be Done
Many homeowners put off major updates or repairs due to their high cost and commitment. But if you've put things off to the point where the work really needs to be done, don't overlook this source of credit and allow the property to deteriorate any further. You can often spread out payments the most of any source of credit, putting even expensive repairs within reach.
5. You Can Deduct It on Taxes
In general, the interest paid on home equity loans and second mortgages can be deducted from your taxes if they pay for capital repairs and improvements. Check with your tax preparer to see whether or not you can use this deduction. Doing so will help cover the cost of the loan, which is a unique feature you won't get from other loans.
Want to know more about financing your home improvements through the property's equity? If so, start by meeting with a lender who works with home equity and mortgage financing today.