Should You Remodel or Refinance - Deb L


Homeowners: Should You Remodel or Refinance?- To remodel or to refinance?  That is the question.  This has been a long-debated question that brings about many others.  Should I wait to refinance my home until my remodeling is complete?  What if I want to use some of that money to fund my remodeling?  Maybe I should get a construction loan, finish the improvement projects, and then refinance both of my mortgages?  Relax, take a deep breath, and before you drive yourself crazy thinking that it’s either refinancing or remodeling, remember that you can do refinancing and remodeling.


Sure, you could shop around for an equity loan based on the current appraised value of your property.  Or if you’d rather try to get a loan based off of the projected value of your home once remodeling is complete, you could get a construction loan.  The cost of remodeling typically surpasses the current value of the home, making a construction loan seem like the best option.  However, each of these loans has some potential pitfalls.


Both equity loans and construction loans are usually considered second mortgage loans.  The danger?  These either carry higher interest rates starting off or they will have an adjustable rate, one that starts low but ends high.  You could feel the extreme strain of high or changing interest rates during your remodeling period.  On top of all of the pre-existing stress of remodeling, the last thing you need is financial pressure.


The solution? You can kill two birds with one loan.  Some lenders are now offering a first mortgage refinance to get your lower rate while also borrowing money for home improvements.  The best part?  You’ll get that low interest rate and your borrowing for improvements is not adjustable.  Low rate today; low rate tomorrow.  It really is the best of both worlds.  Not all lenders, however, offer these kinds of loans, so be sure to shop around to track them down.


So where do you go from here?

  1. Decide on what remodeling you want done and price out how that looks just for your own reference.
  2. Re-familiarize yourself with the current state of your mortgage.
  3. Shop around for lenders who offer the refinancing and borrowing loans.


Take this information to heart and start figuring which lender will help your goals become realized.  When it comes to remodeling and refinancing, why bother trying to pick just one when you could have them both?