Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
The best way to add value to your home is through home improvements.
These projects take on many forms, ranging from a new kitchen or bathroom to finishing a basement or attic space.
As excited as you may be about renovating your home to boost its value, there’s a question you must first answer: How will you pay for your upcoming home improvement projects?
A cash-out refinance for your home’s improvement just might be your answer. Let’s get into what it is, how you can use it, and the pros and cons of refinancing for home improvement.
Refinancing for home improvement is exactly what it sounds like. You refinance your current mortgage, take cash out (as long as you have equity in your property), and use that money to renovate.
You’re left with a mortgage payment based on the balance of your loan at the time of refinancing and the amount of cash you borrowed.
Here’s a simpler way to think about it: You borrow more than you owe and keep the difference for any home improvement projects you want to complete.
When refinancing for home improvement, you can use the cash for anything and everything related to renovating your property. This can include things such as:
Your imagination is your only limitation. Once you know how you want to improve your home, you can move on to finalizing the details with your contractor.
Every lender has its own eligibility requirements for a cash-out refinance. Understanding how to qualify will allow you to put your best foot forward upon applying.
The primary requirement is that you have enough equity to borrow. In other words, if your home is worth $300,000 and you owe $290,000, you’re not going to be eligible for a cash-out refinance, home equity loan, or home equity line of credit.
Other general requirements include but are not limited to:
If you have equity in your home, turn your attention to these requirements. If all three of these points check out, you’re in a position to apply for and receive approval for a cash-out refinance.
There are many benefits of refinancing a mortgage for home improvement. Some of these include:
Along with the above, you should also consider the potential pitfalls of refinancing for home improvement:
Don’t focus solely on the benefits of refinancing for home improvement. Consider if there are any drawbacks that should give you a reason to pause. You never want to make a mistake when it comes to your finances and investment in your home.
The above is a good start, but there are other things you need to know about doing a cash-out refinance for home improvement. Here are three important details:
Even if you’re confident that a cash-out refinance makes the most sense, it never hurts to consider alternative options. Some of these include:
There is no shortage of ways to add value to your home.
If you need funds to do so through a home renovation project, it’s time to strongly consider a cash-out refinance.
While there are many steps in the process, when you reach the end of the line you’ll feel good about where things stand.
If you’re ready to take the first step, My Perfect Mortgage is here to show you the way.
With our service, it’s simple to connect with lenders that can explain all your loan refinance options.
Photo by Blue Bird from Pexels
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.