Connect with us

Company

Three reasons you should refinance your home right now with a renovation loan

Published

on


Is using your kitchen table as an office-slash-kids’-classroom making you long to upgrade your home? You’re not alone.

Sixty-one percent of American homeowners have taken on home improvement projects since March 1, 2020, according to NerdWallet’s 2020 Home Improvement Report. But before you can join them, you’ll have to decide how to finance your project.

Refinancing with a renovation loan is a way to borrow money for home improvements at a lower interest rate than personal loans or credit cards. And instead of paying back a separate loan, the costs of your updates are rolled into your new mortgage payment.

Intrigued? Here are three reasons to consider refinancing with a renovation loan.

Reason 1: You can take advantage of low interest rates

With mortgage rates falling throughout 2020, the number of mortgage refinances has skyrocketed.

Americans took out over 2.3 million refinance loans in the second quarter of 2020, according to mortgage industry analytics company Black Knight. Even with all that refinance activity, Black Knight estimates that almost 18 million homeowners could still benefit from refinancing.

Also on MarketWatch: Nearly half of all professional women make this money mistake — and it’s easy to fix

With a renovation refinance, improvement costs become part of your new mortgage amount. Because rates are at or near record lows, this could mean borrowing more without drastically changing your monthly mortgage payment. While it may not compare to a credit card with a 0% introductory APR, a renovation refinance gives you a higher borrowing limit. And you’ll pay much less interest than you would on a personal loan for the same amount of money.

Reason 2: Remodeling is an accessible alternative to buying

Though the spring homebuying season got off to a slow start due to the coronavirus pandemic, real-estate markets throughout the country have since heated up. According to the National Association of Realtors, 69% of homes sold in August were on the market for less than a month and the inventory of unsold homes was down almost 19% when compared with a year prior.

See: Mortgage rates hover near record lows — fueling higher home prices

“Multiple offers and bidding wars have just led some people to stay where they are and customize the home to their liking,” comments Jamie Zeitz, a Jacksonville, Florida-based sales manager with Homebridge, which offers renovation loans.

More than 1 in 5 (21%) of those who have tackled home improvement projects since March opted to do so instead of looking to move, according to NerdWallet’s 2020 Home Improvement Report.

Though concerns about the spread of COVID-19 initially caused contractors’ workloads to drop, “by the end of the second quarter, people had found workarounds,” says Paul Emrath, vice president of surveys and housing policy research at the National Association of Home Builders.

And they seem to be working. The NAHB’s Market Index for the third quarter of 2020 found that remodeling professionals were quite confident about the current market and the outlook for the rest of the year.

Reason 3: You may add value to your home

A smart renovation can boost your property’s value — and it isn’t all about curb appeal or gourmet kitchens, either.

A 2019 joint report from the NAR and the National Association of the Remodeling Industry found that replacing outdated heating and cooling systems or upgrading insulation offered some of the best returns on investment when it came time to sell, for example. Meanwhile, such updates could result in a more comfortable home and lower utility bills.

You might like: 4 ways to pay for a remodel without using your home equity

And, unlike a cash-out refinance, a renovation loan may expand your budget by allowing you to borrow against the home’s expected value after improvements are complete, rather than its current value. Similarly, you may be able to take advantage of a renovation refinance even if you haven’t owned your home long, since these loans require less equity than a cash-out refinance, home equity line of credit or home-equity loan.

Tips for using a renovation refinance

Think a renovation refinance might be for you? Here’s what’s next:

Research the right loan product: Renovation loan options include Freddie Mac’s CHOICERenovation loan, Fannie Mae’s Home Style renovation loan and FHA 203(k) refinance loans from the Federal Housing Administration.

Your credit score and the improvements you plan to tackle determine which renovation loan is right for you, Zeitz says.

FHA 203(k) loans typically have more lenient credit requirements, but place limits on the types of renovations you can do. If you wanted to, for example, put in a pool, you’d need to qualify for a conventional renovation refinance like the Fannie Mae Home Style.

Get familiar with refinance requirements: In addition to available home equity, your lender will examine your credit score, debt-to-income ratio and employment history to determine if you qualify for the renovation refinance loan you’re seeking. If you’re considering a 203(k), bear in mind that even though the FHA’s credit score minimums are typically low, lenders can impose their own higher numbers.

Find an experienced contractor: to know how much you’ll need to borrow — or how much your home may be worth once the remodeling’s done — you’ll need accurate cost estimates from a licensed contractor. It’s also important to have a contractor who’s willing to take on the extra paperwork and planning involved with a renovation loan.

Compare lenders: Though rates are low, comparing interest rate quotes from at least three lenders will ensure you get the best deal. Your research may be a bit tougher since not all lenders offer renovation loans. Even lenders that offer FHA loans may not necessarily offer FHA 203(k) loans. But once you find the right fit and get approved, you’ll be on track to create the home you need from the house you already have.

More from NerdWallet:



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Company

These money and investing tips can help you with stock and bond strategies to whip inflation

Published

on

By


Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, can help you prepare your portfolio for a period of higher inflation — transitory or not.

Sign up here to get MarketWatch’s best mutual funds and ETF stories emailed to you weekly!



Source link

Continue Reading

Company

These money and investing tips can shine some light through the stock market’s ‘June gloom’

Published

on

By


Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, can help your decision-making if the market outlook becomes cloudier and momentum starts to fade — even as the outlook for the post-pandemic economy gets clearer.

Sign up here to get MarketWatch’s best mutual funds and ETF stories emailed to you weekly!



Source link

Continue Reading

Company

These money and investing tips can help you stay belted in when stocks get on a roller coaster

Published

on

By


Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, give you a 360-degree view of opportunities and strategies to capitalize on in case stocks go into a June swoon.

Sign up here to get MarketWatch’s best mutual funds and ETF stories emailed to you weekly!

INVESTING NEWS & TRENDS
Dow 37,000? It’s possible if U.S. stocks stage an ‘average’ summer rally

Dow Jones Industrial Average has gained 7% on average between the beginning of June and the end of August.
Dow 37,000? It’s possible if U.S. stocks stage an ‘average’ summer rally

Why it matters to the stock if Facebook is a tech company or a media play

In one of these industries Facebook shares are undervalued, which influences the stock price.
Why it matters to the stock if Facebook is a tech company or a media play

Small-cap stocks will go nowhere over the next year, according to the indicator with the best track record

Still, the gauge has been too bearish as smaller companies rally.
Small-cap stocks will go nowhere over the next year, according to the indicator with the best track record

These cool, high-quality stocks are just right for this overheated, overvalued market

Well-managed companies boast strong cash flow, a stable shareholder base, and are under most investors’ radar.
These cool, high-quality stocks are just right for this overheated, overvalued market

Investors should own these four sectors as the economic recovery plays out: SPDR U.S. chief strategist

Michael Arone of State Street Global Advisors recommends owning cyclical stocks in the financial, energy, materials and industrial sectors.
Investors should own these four sectors as the economic recovery plays out: SPDR U.S. chief strategist

It really is different this time — a new era for stocks is just getting started

Why you can’t expect the stock market’s future to look anything like the past.
It really is different this time — a new era for stocks is just getting started

Life might feel more certain this summer, but betting on a calm stock market still could go wrong

Record margin balances to messy economic data may keep investors holding their breath.
Life might feel more certain this summer, but betting on a calm stock market still could go wrong

When claiming Social Security at age 66 makes sense

The conventional wisdom to always wait until age 70 isn’t always right
When claiming Social Security at age 66 makes sense

If your financial adviser is giving you fits, it might be time to break up

Advisers have to be attentive to clients or risk losing them.
If your financial adviser is giving you fits, it might be time to break up

Bitcoin holders have no choice but to trust in Chinese crypto miners

Two-thirds of the world’s bitcoin mining power is based in China, leaving the cryptocurrency potentially vulnerable.
Bitcoin holders have no choice but to trust in Chinese crypto miners

A reality check on inflation

Art Hogan, chief market strategist for National Securities, discusses fluctuations in the cost of industrial materials.

A reality check on inflation

Bitcoin volatility signals a long road to adoption

China’s recent warning on cryptocurrency sent the market in a tailspin. WSJ’s Aaron Back explains why the recent shake-ups in the value of bitcoin, dogecoin, ether and other cryptocurrencies may point to obstacles in mainstream acceptance.
Bitcoin volatility signals a long road to adoption

3 ways to promote racial equity with your investments

Here’s how to apply a racial equity lens to your portfolio in order to support racial justice with your investments, while at the same time meeting your personal financial goals.
3 ways to promote racial equity with your investments

What you need to know about the race to the first Bitcoin ETF

Cryptocurrency skeptics and supporters have cited benefits and concerns about what the approval of a bitcoin ETF may mean for investors.
What you need to know about the race to the first Bitcoin ETF



Source link

Continue Reading

Trending