How To Finance Home Additions
So often people find the their homes just aren’t as big as they would like them to be. Perhaps they have an couple of kids or started working from home and need some more space at the best price. The problem is that moving house has got to be one of the most stressful things that you can possibly do.
Not only is moving home stressful, it’s also very expensive. Think about all the expense of advertising your home for sale, legal fees and moving costs. Also, with the economic situation the way it is, it can take many many months before you even find a buyer for your home.
So it’s no surprise to find out that people are looking at ways to make their current home bigger and therefore negate the need to move home. Of course, carrying out any kind of building work is never cheap and there are also hurdles you need to get through in terms of planning permissions and such like.
Although, weighing up the pros and cons of home additions, it’s still a good thing to consider. It should also add value to your home which will also mean it will be easier to sell if you even decide to do so.
When it comes to financing your home additions there are many different options you will want to look at. It’s certainly not something you will want to rush into.
First of all there is the option of simply remortgaging your home for a higher amount than your current mortgage. If you’ve had your mortgage for quite some time you might even be able to get a better rate of interest by comparing all the deals on the market. Unfortunately the mortgage market is quite different from what it was a few years ago.
If you have any problems with bad credit or your mortgage is “underwater” then you might really struggle to remortgage at all. Of course, it’s still worth looking around. Many people just go to their bank for a quote however you should make sure you compare lots of banks and also check out credit unions.
Home Equity Loans
Home equity loans are a good option for those who actually have equity in their homes. So if your mortgage is currently at $100,000 but your home is worth $250,000 then you have $150,000 worth of equity. How much of a home equity loan you can get really depends on a number of factors including your ability to repay the loan.
Unlike a remortgage, a home equity loan is actually a second mortgage and many people take these loans out to pay for a variety of different things, not just home improvement.
Home Equity Line of Credit (HELOC)
This type of home improvement financing uses your home as security. What makes this different from the options above is that you are given a check book or credit card which you then use to pay for your home additions. The thing with home improvements is that the work is often paid for in stages. This means there no real point in having access to all the money straight away. Instead you can take the money out of your account as and when you need it.
Of course, you might not be wanting to build a large or expensive addition to your home and therefore only require a small amount of money. If this is the case, you might not see any point in making use of the above options. Instead a basic personal loan can work out well. There are loans that are secured and unsecured so you should have a look at both of these types to see what works for you.
Check Your Credit Reports
Before taking out any kind of finance it’s a very good idea to get copies of your credit reports to make sure there aren’t any errors listed. You don’t want to be penalized for mistakes that aren’t of your doing. Your credit history plays a very big part in the approval process of any kind of loan.
As you can see, there are quite a few options available to you when having home improvements carried out. Of course, you will also want to learn about how to get a proper deal from your contractor and understand the importance of having a contingency plan if you go over budget. Nothing ever ends up being as cheap as you hoped it would be.