Home renovations are a popular alternative to purchasing a bigger house. The great thing about renovating is your ability to customize the space and ensure that it fits your personal preferences. Knowing how to finance home renovations in MA are useful. Here are some common methods.
Home Equity Line Of Credit
If you have a lot of equity in your home, look into a home equity line of credit. Many lenders will loan up to 80 percent of the market value of your home. A Home equity line of credit has appealing interest rates and little to no closing costs. Interest paid may be tax deductible (check with your accountant to confirm). Note that the loan term is normally only 10-20 years and applicable rates could be variable.
Unsecured loans are not a perfect solution but are certainly an option. Interest rates are traditionally higher on unsecured loans than other financing options. Additionally, amounts paid for interest are not tax deductible. Many people use it as a temporary solution. When renovations are completed, your property value will improve. This might empower you to then obtain a home equity line of credit or pursue refinancing the existing loan. That money may then be used to pay off the original unsecured loans.
Home Loan Refinancing
Refinancing involves getting a new mortgage at a higher amount that will cover paying off the existing loan plus paying for home renovations. This allows you to have just one loan moving forward. You can obtain a loan with a fixed rate and essentially spread your renovation costs over the life of your loan (i.e. 30 years). The amount for which you can refinance depends on your existing mortgage balance and the current market value of your home. Also keep in mind that there are closing costs involved with refinancing.
How To Finance Home Renovations In MA
Speak with your local lender for a pre-approval on one or more of these options. Additionally, there may be special home renovation programs available. Regardless of which financing solution you choose, remember that your future monthly home expense will be greater as a result. Before moving forward with a project, know what you can afford and what renovations can be achieved with that budget. The information on how to finance home renovations in MA in this blog are intended as a general overview.
Updating Your MA Homeowners Insurance Policy
After you have completed your renovations, contact your homeowners insurance company to review your policy. You may want to update the policy to reflect the changes made. For example, if you have added new living space or high end fixtures, you may need to increase the policy amount to cover the replacement value of those new features.