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Finance Your Home Remodeling with Your Home's Equity
By JJ Singh
California Mortgage Rate Columnist
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Add a new countertop, a deck, and maybe even a swimming pool. You want to improve your home but you don't have much cash in the bank. Now you can turn your house into your dream home with a home equity loan.
Home Improvement to Complete Your Dream
You can sit in a new sunroom, park your car in the enlarged garage, or even throw posh get-togethers in your lush garden. While the price tags on these home improvement projects might seem more than you can afford, you can use the equity in your home to pay for them.
Home Equity to the Rescue
Let's say you've owned your home for a few years and you've been faithfully making payments. Chances are you've likely built up a lot of equity in your home.
Equity is the difference between the value of your home and the balance of your mortgage. You can borrow against that equity in your home by obtaining one of two types of home improvement loans:
- Home equity loan. This loan is a one-time installment loan. You'll get all the money up front, so it's best to use it for projects that require a large cash outlay.
- Home equity line of credit (HELOC). Think of this as your home improvement credit card. You can withdraw varying amounts money whenever you need it, up to the amount you were approved for. This is especially useful for projects that need financing in stages (contractor fees, inspection costs, etc).
In addition to making your home more appealing, home improvements can also increase your home's value. Because your equity is tied to your home's value, a home equity loan for home improvement can ultimately increase your home's value.
Sources:
www.bankrate.com
About the Author
JJ Singh is a returned Peace Corps Volunteer, formerly stationed in Bolivia. Previously, he has worked as a consultant for an international development bank and as an interpreter and docent at a historic site in Virginia. JJ has a degree in economics from the University of Virginia and studied part-time at the University of Valencia in Spain.
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