Preparing to remodel your home can be an exciting, but sometimes stressful time. To lessen the anxieties of the remodel, getting your home improvement budget and lending of finances in order first can help alleviate your jitters.
There are plenty of ways to pay for your home remodel, here are a few possible ideas:
- Take out a second mortgage
- A home equity line of credit
- Refinance your current home loan
- Use a low interest rate credit card
- Pay cash from your savings
We at Projects are not financial experts, so here is a quick checklist of what you should ask a home loan lender:
- Which mortgage plan would work best for our circumstances?
If you are looking for a loan for a single project or multiple projects, you may need a different kind of mortgage plan. Ask the lender which are the most popular options for your unique situation, they will give you the best idea of which option to choose.
- Will I need to purchase PMI (private mortgage insurance)?
Putting down more than 20% of the loan will remove the need for PMI. If not, the lender will need you to purchase this insurance in case you default on your loan. The cost of this insurance varies between 0.5% to 1% of the total loan.
3. How long is the rate you are giving me today good for?
Interest rates fluctuate frequently, so it’s vital to know how long the rate you were quoted is good for. There is an option to “lock-in” a rate so there are not any last minute surprises, especially if you are noticing interest rates are trending on the higher side. Rate lock-ins allow one chance to float down if rates have dropped. You can review the rates about a week before closing on the loan.
4. Will I be penalized for paying off my loan early?
The lender will be able to give you this information, it is called a “Pre-Payment Penalty.” The rules are different for each mortgage/lender situation.
5. What will my closing costs be?
You will be required to pay the down payment and homeowners insurance premiums and possibly escrow accounts if you are refinancing an established loan. There could also be some other smallers collection accounts to be paid at closing.
We hope that these tips help you to determine how you will finance your next home remodeling project.
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