Finished Home Renovations? 5 Reasons To Pay Through Refinancing
Have you completed renovations on your home? Remodeling to improve the property has many benefits, both personal and financial. And now may be the time to take advantage of these benefits through refinancing your mortgage. Why is the post-remodel period a great time to refinance? Here are five of the most valuable reasons.
1. Increased Value Allows Cash Out
Most home renovations result in an increase in the market value of the property. But your mortgage has stayed the same throughout the renovations. A smart homeowner can take advantage of this increased value by refinancing for enough to pay off the first mortgage and some or all of the renovation costs. A low-interest refinance may even allow you to take out the extra cash and still have the same payment or terms.
2. You Can Remove PMI
Private mortgage insurance (PMI) is often mandatory when homeowners borrow more than 80% of the value of the home. Want to get rid of this extra cost? If your remodel project raised the appraised value of the house, your mortgage may now fall under the 80% threshold. Some mortgages automatically allow you to remove PMI, but most require a refinance in order to accomplish it.
3. Refinancing Is a Low-Interest Loan
Mortgages are some of the lowest interest loans many Americans have access to, so they're perfect to pay for home improvements. Whether you put the renovation work on a credit card, used a personal loan, or accessed a 401(k) loan, you're likely to save money if you can roll it into a mortgage instead. Pay off more expensive credit, and save thousands over the life of the mortgage.
4. You Consolidate Payments
Simplify your repayment of the remodeling costs by bundling it with your existing mortgage. By taking out only one loan to cover both the house and its improvements, you make things easier on yourself. This also reduces the risk of missing or forgetting any payments and triggering fees or additional penalties.
5. It's Better for Your Credit
Putting large renovation costs on a credit card, equity line, or other forms of revolving credit lowers your credit score. This is generally due to the reduced amount of available credit left over. But your mortgage payment doesn't affect your credit score in the same way. Instead, all you will see is the benefit from lower carried balances and one on-time mortgage payment each month.
Where To Start
Want to know more about using a refinanced mortgage to pay back renovations to your property? No matter how much or how little, this move can save money, time, and stress. Start by meeting with a lender who specializes in refinance mortgages in your state today.