How to Use Equity for a Home Renovation
The decision has been made. It’s time to tackle that Vancouver home renovation project you’ve been dreaming about. You love your home as it is now but you would REALLY love it when you remodel your kitchen or bathroom. Now before you start asking for quotes from Vancouver contractors, make sure to take some time to review your budget and consider how you’re going to finance that kitchen renovation or bathroom remodel.
A home renovation, large or small, will determine the amount of financing you will need. Most of us don’t have large piles of cash lying around but many have home equity. The question then becomes: what’s the best way to access that equity to help with your home renovation?
The following are home equity options which can be used in any combination:
- Secured line of Credit – a line of credit registered on title of your home comes with many benefits. You can draw monies from the line as you incur expenses and you can pay off at any time without any penalty. Your home renovation project will be stress free.
There are some drawbacks to the secured line of credit which include its rate is generally higher than fixed mortgages, the interest rate fluctuates with prime and in rare cases, can be called by the bank on short notice.
- Mortgage loan – in the case of a clear title home, registering a mortgage can give you excellent cost certainty and affordable repayment terms. However, as soon as the mortgage is registered, you would immediately incur principle and interest payments even though your home renovation has yet to begin.
- Mortgage refinancing – if you already have a mortgage on your home, there is an option to add on without incurring any penalties. A mortgage refinance would carry all the same benefits and drawbacks as a new mortgage loan but there could be the potential of reducing your current interest rate with the increase and blend of the new monies at today’s rates.
Whether it be a major or minor home renovation, funding will be required. Speaking with a Mortgage Professional will help determine which home equity option is right for your situation. With the financing in place, contact a Vancouver contractor and let the dream home renovation begin!
Mike Donovan has almost a decade of industry experience in Mortgage and Real Estate. He is the founder of BrokerSmart and co-owner of Verico Coastal Mortgages Inc. BrokerSmart simplifies life for their clients by providing a one stop, multi service real estate solution.
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