Top 5 Strategies to Stay on Budget for Your Next Home Remodel

June 22, 2022

mortgage blog, home remodel, renovation, preferred rate

These top 5 strategies can help you stay on budget, plan ahead, get the best financing and save money on your next home remodel. Home remodels and renovations come in all shapes and sizes. Blowout kitchens, bonus rooms, a new home office, or giving your bathroom a luxury upgrade. Thousands of homeowners across the country are refinancing their mortgages to take advantage of their home equity before mortgage rates push higher. So if you’re thinking about refinancing to start a home remodeling project or renovation, you’re in good company.

The costs of a home remodel vary by location and higher interest rates translate to higher mortgage rates. It’s smart to connect with a local mortgage advisor early on! You’ll be able to access your home equity at the lowest rate available, and stay on budget for your next home remodel project.

Keep these strategies in mind to stay on budget and tackle that renovation you’ve been dreaming about.

TOP 5 HOME REMODEL STRATEGIES TO STAY ON BUDGET

1. Keep the scope of the project in check.

The number one reason most home remodels run over budget might be surprising. It happens when homeowners change their minds. Turns out that changing the scope of the project is the number one reason most home remodels slide beyond the budget.

Changing your mind on kitchen cabinets or tile flooring, for instance, after supplies have been ordered. Or deciding on structural changes once new framing has begun.

In almost every case, the work has started, materials have been ordered, or supplies have been delivered, and the cost is already measured. As much as possible, take your time and picture your home renovation from start to finish. Ask your builders and designers as many questions as you can before the work begins.

Often there’s a lot of work on the back end that the homeowner may not see, which becomes a surprise when they change their mind.

2. Expect new fees for building permits and current building codes.

Many home remodels look straightforward and clear-cut at the start. However, once the work begins it’s very common for new obstacles to show up and new work will be required to bring the home up to code. Why? Building codes often change over time, so there are typically new codes and permits that have been put in place after the home was first built.

Each state has its own rules to follow, but most states and counties require contractors to meet current building codes if they discover a conflict. Across most states in the country, if a contractor discovers something that isn’t up to code, they are required to do the work to bring it up to code.

Any and all costs associated with bringing the house up to code will be passed along to the homeowner. So, make room for these unexpected changes, especially if you have an older home or if you are doing a major home remodel.

3. Plan for structural repairs and hidden damage.

Floorboards, roofing, foundations and framing are all home to pests and critters. Often the damage is hidden until construction begins and then the damage is exposed. Many older homes have structural damage caused by termites, wood rot, mold, or water damage.

It might seem impossible to prepare for unexpected costs like replacing the subfloor or foundation. However, it’s worth taking the extra step to have a professional home inspection done before you begin the work. Talk with your contractor about the age of your home. Also, find out if they’ve done work on other homes in your neighborhood. This can reduce a lot of stress and keep the home remodel project moving forward.

4. Increase your budget for weekend getaways and eating out.

A home remodeling project that includes the kitchen usually means there will be days when you won’t have power, gas, water, or working appliances. What’s more, kitchen remodels often run much longer than expected, and homeowners often find themselves eating out more than they first planned. Camping in the backyard or eating on hotplates can sound novel, but the reality wears off quickly.

Even home remodels outside the kitchen often get homeowners wanting some peace and quiet. People get tired of the dust, construction, noise, and general chaos. What might be one night out turns into back-to-back restaurants and doordash. With larger projects, some families find themselves moving out temporarily to take a break from it all. Plan ahead so you can reduce stress and budget for the cost.

Also, don’t forget your pets! You may need temporary boarding or plan to take them with you on a short getaway.

Compare: Should I use a Home Equity Loan or HELOC for a home remodel?

5. Set aside extra funds to update your Homeowner’s Insurance.

Home remodels often increase the value of your home, so it’s a good idea to revisit your homeowner’s insurance coverage. For one, you want to make sure the renovations are covered under your policy and that your coverage meets your home’s new value. Certain home remodels and renovation projects such as adding square footage, a new office, or a full-scale kitchen remodel will increase the value of your home. It just takes a quick call to your service provider to make sure you have the coverage you need.

What’s the best way to pay for a home remodeling project?

Many homeowners consider a home equity loan or a home equity line of credit for a home remodeling project. Others refinance a mortgage or turn to personal loans and credit cards.

The truth is, there are several custom home loan options that can save you money even as mortgage rates continue to rise. A preferred home loan that gives you access to your equity can help you stay on budget and finance your home remodel without added financial stress.

It’s always worth it to connect with a local mortgage advisor to discuss your options–especially when it comes to a home remodel or renovation project.

Taking Action

Connect with a mortgage advisor to determine the best path to refinance for a home remodel or renovation project. Remember, you can access your home equity in several different ways — cash-out refinancing, a home equity loan, a home equity line of credit, or custom home renovation loans. We can help you decide the best option that will save you money and fit your home remodeling budget. Connect with a local mortgage advisor to get started. We’d love to help.

Top 5 Hidden Costs of a Home Remodeling Project

September 28, 2021

So you’ve spent the better part of the past two years at home, and you’re finally ready to give your home a makeover. Maybe it’s a quick facelift or a backyard garden. But for a lot of homeowners, now is the final push before the holidays to take on bigger home remodeling projects like kitchen and bathroom upgrades, new flooring, or even a full-scale home renovation.

The costs of a home remodel vary dramatically by location, but mortgage rates are still low. This means you can access your home equity at a low rate and stay on budget for your dream home remodeling project.

First, beware of these hidden costs so you can plan ahead.

TOP 5 HIDDEN COSTS OF A HOME REMODELING PROJECT

1. Changing the Scope of the Project

Believe it or not, the biggest hidden cost to a home remodel is when the homeowner changes their mind. More than half of all remodeling projects face a “change in scope” which dramatically increases the cost. Changing your mind on kitchen cabinets or tile flooring, for instance, after supplies have been ordered. Or deciding on structural changes once new framing has begun.

In almost every case, the work has started, materials have been ordered, or supplies have been delivered, and the cost is already measured. As much as possible, try to envision a home remodeling project from start to finish and ask questions before the work begins. Often there’s a lot of work on the back end that the homeowner may not see, which becomes a surprise when they change their mind.

2. Building Codes and Permits

Many home remodels look clear-cut on the front end. But once the work begins, it turns out that new work has to be completed to bring the home up to code. Why? Building codes often change over time, so there are typically new codes and permits since the home was first built. Across most states in the country, if a contractor discovers something that isn’t up to code, they are required to do the work to bring it up to code.

Even if the new work wasn’t quoted in the home remodeling project, the contractor is required to meet current building codes, and that cost will be passed on to the homeowner. Allow a larger budget to meet these unsuspected changes, especially if your home was built several years ago.

3. Eating Out and Moving Out

During a kitchen remodel, eating out can become a growing expense and one that is rarely planned for. A home remodeling project in the kitchen usually means you won’t have power, gas lines, or working appliances. Some homeowners set up a temporary kitchen in the basement or garage, but the novelty can wear off quickly.

Even home remodels outside the kitchen often push homeowners out. People get tired of the dust, construction, noise, and general chaos. What might be one night out turns into ongoing restaurants and takeout. With larger projects, some families find themselves moving out temporarily to take a break from it all. Plan ahead so you can reduce stress and budget for the cost.

Also, don’t forget your pets! You may need temporary boarding or plan to take them with you.

Compare: Should I use a Home Equity Loan or HELOC for a home remodel?

4. Surprises and Structural Changes

Many hidden costs are hiding in the floorboards. Literally. Pests, termites, wood rot, mold, water damage. Many homes have hidden structural damage that is only discovered once a home remodeling project is underway. While there’s isn’t a tried and true way to plan ahead for these changes, it’s smart to prepare for the possibility. Have finances prepared so that you can face the problem head-on if any structural damage or surprises come up. This will reduce stress and keep the home remodeling project moving forward.

5. Homeowner’s Insurance

Home remodels often increase the value of your home, so it’s a good idea to revisit your homeowner’s insurance coverage. For one, you want to make sure the renovations are covered under your policy and that your coverage meets your home’s new value. Certain remodeling projects such as adding square footage, a new office, or a full-scale kitchen remodel will increase the value of your home. It just takes a quick call to your service provider to make sure you have the coverage you need.

Why is home remodeling so expensive right now?

Millions of people are spending more time at home than ever before: online school, remote work, DIY projects, home gardens, you name it. As a result, home remodeling and renovations have skyrocketed and the demand for contractors has jumped up in tandem. But even though construction costs are inching upwards, it’s still smart to tap into your home equity and get the job done while mortgage rates are low.

What’s the best way to pay for a home remodeling project?

Many homeowners consider a home equity loan or a home equity line of credit for a home remodeling project. Others refinance a mortgage or turn to personal loans and credit cards.

The truth is, mortgage rates are still low and there are several custom home loan options that can save you money. A preferred home loan that gives you access to your equity can help you stay on budget and finance your home remodel without financial stress.

It’s always worth it to connect with a local mortgage advisor to discuss your options–especially when it comes to a home remodeling project or renovation.

Taking Action

Connect with a mortgage advisor to determine the best path to finance a home remodeling project. Remember, you can access your home equity in several different ways — cash-out refinancing, a home equity loan, a home equity line of credit, or custom home renovation loans. We can help you decide the best option that will save you money and fit your home remodeling budget. Connect with a local mortgage advisor to get started. We’d love to help.

When is it a Good Idea to Buy Mortgage Points?

November 2, 2021

blog young businessman, mortgage blog, mortgage points, preferred rate

Buying mortgage points can lower your mortgage rate. When you buy a home or refinance, you might have the option to buy mortgage points. Buying mortgage points will generally reduce your interest rate by 0.25% (depending on the lender) for each point you purchase. But buying mortgage points isn’t always the best move.

If your top priority as a homebuyer is to lower your interest rate, then buying mortgage points or “discount points” will help you hit your goal. However, paying mortgage points isn’t the best decision for every homebuyer. What’s more, it won’t always help you save money on your mortgage.

The truth is, after discussing the final terms of a mortgage, along with closing costs and down payment options, many clients change their minds about buying mortgage points. Several factors impact a mortgage application, including your credit score, income, employment history, and debt-to-income ratio. Connecting with a local mortgage advisor can help you get the best mortgage based on your homeownership goals.

So then, how does it work when you decide to buy mortgage points?

1. How does it work if I decide to buy mortgage points?

There are two kinds of mortgage points: rebate points and discount points. When homebuyers refer to paying mortgage points, they’re talking about “discount points.” Whether you “pay discount points” or “buy mortgage points,” both phrases mean the same thing.

Discount points allow the homebuyer to pre-pay interest when the loan closes in exchange for a lower interest rate. By pre-paying mortgage interest, you’ll receive a discount on your loan in the form of a lowered interest rate.

Each mortgage point typically costs 1% of the total loan amount. For example, buying 1 point on a $500k mortgage would be $5,000 (2 points would cost $10,000). The interest rate on your home loan would then be reduced by 0.25% for each discount point you purchase.

2. A sample scenario for a fixed-rate 30-year mortgage.

Here’s a sample home loan example for a $450,000, 30-year fixed-rate mortgage.

Loan amount: $450,000
Loan term: 30 year fixed-rate
Interest rate: 4.5%
Monthly payment: $2,280

If you decide to buy 2 mortgage points, it would cost $9,000 (2%), and your rate would be reduced 0.50% (0.25% x 2) to 4.0%. Your new payment would be $2,148.

In this scenario, you’d have a monthly payment that is $132 lower. It will take 69 months to recover the cost of your mortgage points (the original $9,000). After 6 years, you’d break even and begin saving money on your mortgage. Over 30 years, this would amount to a savings of $47,520.

3. Is it always a smart move to buy mortgage points?

In our example above, paying mortgage points at closing can save you a lot of money over the life of the loan. However, if you decide to sell or refinance before you break even, it could end up costing you money.

There are a few additional questions worth considering. How how long do you expect to stay in your new home? Do you have enough cash reserves for unexpected repairs? Are there other investment opportunities that might yield a better return?

Remember, you’ll need cash reserves for home repairs, maintenance, homeowner’s insurance, and other unexpected homeowner costs. If paying mortgage points exhausts your savings, it might be smarter to hold your funds.

Compare: How to Qualify for a Home Loan When You’re Self-Employed

4. Should I make a bigger down payment instead of buying points?

In the example above, if you were to put that $9,000 toward your down payment instead of paying mortgage points, you’d have a smaller loan and a lower monthly payment of $2,234.

Loan amount: $441,000
Loan term: 30 year fixed rate
Interest rate: 4.5%
Monthly payment: 2,234

One important detail: If you can put 20% as a down payment, you’ll have access to better loan terms, lower rates, and you won’t have to pay private mortgage insurance. For this reason, using your extra cash to increase your down payment might be a smart move.

By increasing your down payment, you’ll have a stronger loan-to-value (LTV) ratio, yielding better loan terms.

Understanding the trade-offs and using a mortgage calculator can help you determine what’s best for you financially. Connect with a local mortgage advisor to discuss your best options.

5. If I buy mortgage points, will the amount be tax deductible?

Yes, mortgage points are tax-deductible in most scenarios. When you buy mortgage points, you are technically pre-paying interest on your mortgage. For this reason, any amount you pay to buy mortgage points is treated the same as mortgage interest on your tax forms.

The Tax Cuts and Jobs Act of 2017 has put limits on the amount of mortgage interest that can be claimed as a deduction. For this reason, it’s a good idea to check with your accountant or tax advisor to verify the current limits and tax laws in your state.

Summary

Paying mortgage points at closing is a straight path to securing a lower interest rate on your mortgage. If you plan to stay in your home long-term, buying discount points will save you money on mortgage interest. However, paying down mortgage points along with your down payment, title fees, property taxes, and other closing costs can be tough.

Before you decide to exhaust your savings, discuss your options with a local mortgage advisor. An experienced mortgage advisor can help figure out exactly how much you’ll save each month on your mortgage and how long it would take to break even.

Finally, consider making a large down payment if you have plenty of cash resources to put toward a new home. A bigger down payment could generate more favorable loan terms that could end up saving you more money than deciding to buy mortgage points.

Taking Action

If you’re not sure whether buying mortgage points is the best financial decision, we can help guide you through the process. It’s important to understand the final terms of your loan, closing costs, and down payment options before you decide to buy discount points. Connect with a local mortgage advisor to discuss your goals and set yourself up for financial freedom. We’d love to help.

Benefits of a Reverse Mortgage When Costs are Rising

May 25, 2022

mortgage blog, reverse mortgage, happy couple, preferred rate

Mortgage rates appear to be increasing ever so slowly while inflation is hitting our cash flow and monthly budgets. The dollar is buying less when it comes to groceries, gas, clothing, and travel. Understandably, homeowners have been asking us about the benefits of a reverse mortgage. Economic uncertainty seems to be standard fare for homeowners across the country right now, and information about reverse mortgages can appear conflicting and confusing.

If you’ve got a substantial amount of equity in your home and you’re over the age of 62, can a reverse mortgage provide financial stability? When is a reverse mortgage a good idea? Are there hidden dangers of a reverse mortgage?

We hear you.

After all, one of the biggest benefits of homeownership is accessing your home equity when you need it most. Keep reading to learn the pros and cons of a reverse mortgage and decide if it’s a good fit.

1. What is a reverse mortgage and how does it work?

At its core, a reverse mortgage is one way to refinance your mortgage. A reverse mortgage allows homeowners to turn their home equity into cash while deferring mortgage payments. As with every mortgage, your home is the collateral for the new loan.

A reverse mortgage is similar to refinancing with cash-out. But with a reverse mortgage, you can defer your mortgage payments. In fact, with a reverse mortgage, you don’t need to pay back the loan until the homeowner moves out, sells the property, or passes away.

For example, let’s say you own a home and you’ve been making monthly mortgage payments on a 30-year mortgage for several years, and now your mortgage balance is $100k. Your home has also increased in value and is now worth $650k.

A reverse mortgage allows you to borrow against the equity in your home ($550k) and receive the funds in a lump sum or monthly payments over a set term. There are limits to how much a homeowner can borrow.

There are no restrictions on how you use the funds.

Once you’ve qualified for a reverse mortgage, you can defer your mortgage payments until you move or sell the house. Interest will accrue on your new mortgage, but rarely will your mortgage balance surpass the value of your home.

2. When is a reverse mortgage a good idea?

If you’re a homeowner over the age of 62 with substantial equity in your home, a reverse mortgage might be worth considering. You can access your home equity and use the cash any way you like, without restrictions. Funds are disbursed as a lump sum, regular monthly payments, or even a line of credit.

Highlights:

Access to home equity as spendable cash
Option to defer mortgage payments
Option to receive in a lump sum or monthly payments
Use funds to supplement retirement income
No taxes due on the income since they are loan proceeds
Protected if the mortgage surpasses your home’s value

3. Do I need to make monthly mortgage payments on a reverse mortgage?

No. One of the main benefits of a reverse mortgage is that you have options for paying your mortgage. The main benefit is that you can access your equity now and have it disbursed to you monthly, as a lump sum, or even as a line of credit.

You get to decide how you want to pay back your mortgage:

Make monthly payments against your new mortgage balance
Defer payments for a limited amount of time
Defer payments until you decide to move or sell the home

With a reverse mortgage, if you decide to defer mortgage payments, the interest on the loan will continue to accrue. As interest accrues, the balance will increase, but the equity in your home will also increase. Rarely will a reverse mortgage balance surpass the value of the home.

Connect with a mortgage advisor to determine which option works best with your financial goals.

4. Who is eligible for a reverse mortgage?

Homeowners must be at least 62 years old and have substantial home equity. When you apply for a reverse mortgage, it’s similar to applying for a mortgage refinance. The application process will require a home appraisal, financial documentation, a credit report, and general mortgage application information.

Connecting with a local mortgage advisor to discuss your goals can be extremely helpful since there are a few restrictions and requirements.

Once you qualify for a reverse mortgage, you can decide how much you want to borrow, up to the approved loan amount.

5. How do I access funds with a reverse mortgage?

With a reverse mortgage, you can receive a lump sum, monthly payments, or use a line of credit. Once you qualify, you can decide how much you want to borrow and how you want to receive the funds, up to the loan amount approved by your mortgage lender.

Often, homeowners choose a reverse mortgage to help with monthly expenses, health care needs or as a supplement to retirement income.

6. Who pays off a reverse mortgage if the property owner moves or passes away?

Reverse mortgages can be paid off at any time. In most cases, a reverse mortgage is paid off when the owner moves or passes away.

With an estate, heirs can pay off the mortgage directly, refinance if the property has sufficient value, or sell the property to pay off the mortgage.

In the few instances where the home’s value falls below the loan balance, heirs can settle the loan by returning the title to the lender. This is called a non-recourse loan, and the heirs will not be liable for the balance.

Most reverse mortgages are insured by the FHA, which guarantees final payment to the mortgage lender.

7. What happens when you sell a home with a reverse mortgage?

When you sell a home with a reverse mortgage, the mortgage balance is paid in full when the sale closes. If there is equity left after you pay off the mortgage balance, that money is disbursed to you (the property owners) or the heirs if part of an estate.

If your home’s current market value is lower than the current mortgage balance and you no longer want to live in the home, the mortgage is settled as a non-recourse loan.

A non-recourse loan means that the loan can be settled by giving the title back to the lender. Neither the owner nor the heirs will be liable for the balance. Almost all reverse mortgages are insured by the FHA, which guarantees full payment to the mortgage lender.

Worth noting— foreclosures can still happen if property taxes or homeowner’s insurance are not paid on time.

Taking Action

Connect with a mortgage advisor to determine whether or not a reverse mortgage is a good fit. Remember, you can access your home equity in many different ways — with a reverse mortgage, cash-out refinancing, a line of credit, or a home equity loan. We can help you decide which path will save you money and provide financial stability. Connect with a local mortgage advisor to get started. We’d love to help.

Reverse Mortgages: All You Need to Know

September 24, 2021

Lately, we’ve been getting a lot of questions from homeowners about reverse mortgages. It’s understandable. Economic uncertainty seems to be standard fare for homeowners across the country right now, and information about reverse mortgages can appear conflicting and confusing.

If you’ve got a substantial amount of equity in your home and you’re over the age of 62, can a reverse mortgage provide financial stability? When is a reverse mortgage a good idea? Are there hidden dangers of a reverse mortgage?

We hear you.

After all, one of the biggest benefits of homeownership is accessing your home equity when you need it most. Keep reading to learn the pros and cons of a reverse mortgage and decide if it’s a good fit.

1. What is a reverse mortgage and how does it work?

At its core, a reverse mortgage is one way to refinance your mortgage. A reverse mortgage allows homeowners to turn their home equity into cash while deferring mortgage payments. As with every mortgage, your home is the collateral for the new loan.

A reverse mortgage is similar to refinancing with cash-out. But with a reverse mortgage, you can defer your mortgage payments. In fact, with a reverse mortgage, you don’t need to pay back the loan until the homeowner moves out, sells the property, or passes away.

For example, let’s say you own a home and you’ve been making monthly mortgage payments on a 30-year mortgage for several years, and now your mortgage balance is $100k. Your home has also increased in value and is now worth $650k.

A reverse mortgage allows you to borrow against the equity in your home ($550k) and receive the funds in a lump sum or monthly payments over a set term. There are limits to how much a homeowner can borrow.

There are no restrictions on how you use the funds.

Once you’ve qualified for a reverse mortgage, you can defer your mortgage payments until you move or sell the house. Interest will accrue on your new mortgage, but rarely will your mortgage balance surpass the value of your home.

2. When is a reverse mortgage a good idea?

If you’re a homeowner over the age of 62 with substantial equity in your home, a reverse mortgage might be worth considering. You can access your home equity and use the cash any way you like, without restrictions. Funds are disbursed as a lump sum, regular monthly payments or even a line of credit.

Highlights:

Access to home equity as spendable cash
Option to defer mortgage payments
Option to receive in a lump sum or monthly payments
Use funds to supplement retirement income
No taxes due on the income since they are loan proceeds
Protected if the mortgage surpasses your home’s value

3. Do I need to make monthly mortgage payments on a reverse mortgage?

No. One of the main benefits of a reverse mortgage is that you have options for paying your mortgage. The main benefit is that you can access your equity now and have it disbursed to you monthly, as a lump sum, or even a line of credit.

You get to decide how you want to pay back your mortgage:

Make monthly payments against your new mortgage balance
Defer payments for a limited amount of time
Defer payments until you decide to move or sell the home

With a reverse mortgage, if you decide to defer mortgage payments, the interest on the loan will continue to accrue. As interest accrues, the balance will increase, but the equity in your home will also increase. Rarely will a reverse mortgage balance surpass the value of the home.

Connect with a mortgage advisor to determine which option works best with your financial goals.

4. Who is eligible for a reverse mortgage?

Homeowners must be at least 62 years old and have substantial home equity. When you apply for a reverse mortgage, it’s similar to applying for a mortgage refinance. The application process will require a home appraisal, financial documentation, a credit report, and general mortgage application information.

Connecting with a local mortgage advisor to discuss your goals can be extremely helpful since there are a few restrictions and requirements.

Once you qualify for a reverse mortgage, you can decide how much you want to borrow, up to the approved loan amount.

5. How do I access funds with a reverse mortgage?

With a reverse mortgage, you can receive a lump sum, monthly payments, or use a line of credit. Once you qualify, you can decide how much you want to borrow and how you want to receive the funds, up to the loan amount approved by your mortgage lender.

Often, homeowners choose a reverse mortgage to help with monthly expenses, health care needs or as a supplement to retirement income.

6. Who pays off a reverse mortgage if the property owner moves or passes away?

Reverse mortgages can be paid off at any time. In most cases, a reverse mortgage is paid off when the owner moves or passes away.

With an estate, heirs can pay off the mortgage directly, refinance if the property has sufficient value, or sell the property to pay off the mortgage.

In the few instances where the home’s value falls below the loan balance, heirs can settle the loan by returning the title to the lender. This is called a non-recourse loan, and the heirs will not be liable for the balance.

Most reverse mortgages are insured by the FHA, which guarantees final payment to the mortgage lender.

7. What happens when you sell a home with a reverse mortgage?

When you sell a home with a reverse mortgage, the mortgage balance is paid in full when the sale closes. If there is equity left after you pay off the mortgage balance, that money is disbursed to you (the property owners) or the heirs if part of an estate.

If your home’s current market value is lower than the current mortgage balance and you no longer want to live in the home, the mortgage is settled as a non-recourse loan.

A non-recourse loan means that the loan can be settled by giving the title back to the lender. Neither the owner nor the heirs will be liable for the balance. Almost all reverse mortgages are insured by the FHA, which guarantees full payment to the mortgage lender.

Worth noting— foreclosures can still happen if property taxes or homeowner’s insurance are not paid on time.

Taking Action

Connect with a mortgage advisor to determine whether or not a reverse mortgage is a good fit. Remember, you can access your home equity in many different ways — with a reverse mortgage, cash-out refinancing, a line of credit, or a home equity loan. We can help you decide which path will save you money and provide financial stability. Connect with a local mortgage advisor to get started. We’d love to help.

Advantages of a Home Equity Loan vs. HELOC

October 19, 2022

mortgage blog, heloc, home equity loan, preferred rate

Building equity in your home is one of the great advantages of being a homeowner and accessing that equity when you need it is even better. So when it comes to home improvement and house repairs, what’s the best way to tap into your home equity? For homeowners who have seen a big jump in the value of their home over the past few years, you have some options. This short article breaks down the benefits and drawbacks of using a Home Equity Loan vs. HELOC (Home Equity Line of Credit) for home repairs and renovations.

Whether you’re planning a big home renovation or planning your next family vacation, these pros and cons can help you decide the best way to access your home equity.

Home Equity Basics

Home equity is the financial difference between what you owe on your home (your mortgage balance) and the value of your home (based on a formal appraisal). For example, if your current mortgage balance is $478k and the current market value of your home is $680k, then you’ve got a little over $200,000 in home equity.

When you want to access the equity in your home, most lenders will only approve up to 80% of your home’s value. This allows for market fluctuations in property value and lowers the risk of foreclosure in the eyes of the lender. In the example above, 80% Loan-to-Value would be $544k, giving you potential access to $65k.

Home Equity for Home Renovations, Repairs, and Remodels

To decide if a home equity loan or home equity line of credit might be a good fit, it’s a good idea to figure out how you want to use the funds. A few popular updates are:

kitchen remodels
bathroom remodels
new roofing, siding, windows
major landscaping & backyard improvements
home office additions

Another thing to consider is adding an in-law unit or ADU to the property. In a neighborhood with limited space, adding livable space will increase the value of your home and boost the appraised value (which we blogged about here).

Since both a home equity loan and a home equity line of credit are big financial commitments, take time to consider the value of the improvements you want to make or how else you might like to use the funds. Renovations don’t necessarily have to improve the value of your home but they will work to your benefit if they do. Both loans are designed to help maintain and improve the value of your home. Ideally, you want to increase your property value in the process. If you need to sell your house for an unexpected reason, you won’t be upside down when it comes to your mortgage.

Top Advantages of a Home Equity Loan

Home equity loans are almost always fixed-rate loans with set terms that include a fixed monthly payment and a fixed payment schedule. When you’re approved for a home equity loan, you get the full amount in one lump sum. Then you pay off the loan in fixed monthly payments for the entirety of your loan.

The loan terms are agreed upon when you get approved, so there are no surprises or changes in your payment schedule.

Highlights and Advantages:

Lower interest rate that is locked in for the life of the loan
Fixed monthly payments which make is easy to budget and plan
Lump sum all at once so you can start a big project right away
Use the funds for whatever you want
The interest on your home equity loan may be tax deductible

Worth noting: higher credit scores mean lower rates. Check for prepayment penalties in case you decide to pay it off sooner than scheduled, or if you might want to refinance later.

Top Advantages of a HELOC (Home Equity Line of Credit)

A home equity line of credit operates like a revolving credit account. Instead of having a set payment schedule and a fixed rate, HELOCs give you access to a line of credit with a maximum limit. You can use the funds at any time and you don’t accrue any interest until you draw from the account. HELOC’s have a set draw period (typically 10 years) and a variable APR which is based on the prime rate and market trends.

Main Benefits:

Access as much or as little money as you want to meet the needs of your projects
Interest only accrues when you access the funds, not to keep the account open
Repayment terms are flexible, pay it off and make minimum monthly payments
Use the funds for whatever you want
The interest on your HELOC may be tax deductible

Taking Action

If you’re thinking about tapping into your home equity, talk with a local mortgage advisor who can help you reach your financial goals. An experienced loan advisor can save you money and keep the process moving easy and stress-free. When it comes to saving money on your mortgage and tapping into your home equity, we can guide you through the process. Together, we can help you decide which path will save you the most money so you can reach your financial goals faster. Connect with a local mortgage advisor to get started. We’d love to help.

Best Upgrades to Increase the Value of Your Home

September 28, 2022

home value, preferred rate, mortgage blog

As mortgage rates surge, many homeowners are turning to home improvements and renovations. Home improvements and upgrades can bring new life to an older home, but they can also increase the value of your home substantially. Deciding to increase the value of your home is always a good move because it gives you more financial freedom down the road.

Whether you want to borrow against your home equity to invest in a second property, or prepare your home for sale, increasing the value of your home now can set you up for better returns later. And if this is your forever home, upgrades and renovations are a necessary part of homeownership.

That said, many home improvement projects could cost a bundle without increasing the value of your home. So it’s smart to do a bit of research and find out which upgrades are worth the effort when you want to increase the value of your home.

Even if you’re planning to relocate for work or a better lifestyle, updating your home will help you get the best price when it’s time to list your home for sale.

Whether you’re planning to relocate or stay put, here are the top 7 ways to increase the value of your home.

TOP 7 WAYS TO INCREASE THE VALUE OF YOUR HOME

1. Add square footage to your home.

Increasing the usable square footage of your home will directly improve your home’s value. Home appraisals evaluate the livable square footage of a home in addition to other comparables in the neighborhood (such as the number of bedrooms and acreage). Therefore, adding a bedroom or an office will automatically increase the value of your home by the added square footage.

Another thing to consider is adding an in-law unit or ADU to the property. In a neighborhood with limited space, adding livable space will increase the value of your home and boost the appraised value (which we blogged about here).

2. Improve your home’s curb appeal.

Curb appeal doesn’t always translate to a higher home value in a formal appraisal. However, curb appeal has a huge effect on buyers when they visit a home for the first time. So when you compare a handful of homes with similar square footage in the same neighborhood, curb appeal pulls more buyers and generates higher interest. In short, strong curb appeal leads to better offers when you’re getting ready to sell your home.

Landscaping is the path to your front door. Make sure to tidy up the yard, plant some seasonal flowers, keep the grass maintained and freshen up any ground cover. Larger expenses might be fixing walkways or driveways or adding more substantial landscaping. The goal is to get a buyer to stop and shop!

3. Add a fresh coat of paint to your home’s interior and exterior.

Right along with curb appeal, giving your home a fresh coat of exterior paint will improve the perceived value and tell prospective buyers that your home is well-cared for and maintained. Move toward neutral colors that are current for the times and don’t forget your front door.

Interior paint is one of the lowest cost updates you can do to bring a big return. If you’re selling your home, you might need to lean neutral and put a pause on bold choices. Bold colors and personality are beautiful if you’re planning to stay! But for prospective buyers, the interior colors and paint should be welcoming and neutral—a home they can see updating with their own style.

Renovating a fixer-upper? The Fannie Mae Homestyle loan might be a good fit (which we blogged about here).

4. Remodel your kitchen with a modern take.

A kitchen remodel can be costly no matter how you slice it. Often, updating cabinets with a fresh coat of paint and new hardware can have a big impact. Next, update lighting fixtures and replace countertops if they’re worn or outdated.

A bigger remodel can be worth it for many homeowners, especially if you want to stay in your home for a long time. Consider updating your appliances for both aesthetics and energy efficiency. Flooring, countertops, and adding square footage are next on the list. There is a large range of costs vs. value when it comes to kitchen remodels, so work with your realtor if you’re getting ready to sell your home.

Minor kitchen remodels are expected to bring an 80% return, while major remodels have an estimated 48% return on the investment. The value will increase over time as equity builds, so consider this if you’re looking to sell quickly.

5. Give your bathroom a fresh feel.

The bathroom is one of the most important spaces to consider if you want to increase the value of your home. The good news is that small changes can make a big difference. Consider a minor remodel, including fresh paint, updated hardware and lighting, or even DIY bath and shower updates. If you want to increase the value of your home, think about expanding your bathroom or adding updated features like a walk in shower or soaking tub.

For larger projects such as heated flooring and custom fixtures, most homeowners see a 52% return. As your equity grows, the impact will increase as well. Finally, an updated bathroom can increase interest and generate offers much faster. Updating the bathroom should be at the top of your list.

6. Make your home more energy efficient.

There are a lot of options to increase the value of your home and make it more energy-efficient. Consider installing a smart thermostat, improving insulation, and replacing old windows. Take notice of attic insulation and roofing to decide if updates are needed, as well as updating to energy-efficient appliances in your home. Upgrades will improve the comfort and efficiency of your home and also save on utility bills.

Consider adding energy-efficient technologies and safety features. “Smart” technologies are becoming more popular among buyers who are energy-conscious and value home security. Smart tech doesn’t always increase the value of your home for a mortgage refinance appraisal, but new buyers are typically willing to pay more for a modernized home.

7. Get organized! Set a time to declutter and stage your home.

Organize and declutter to give your home newly found space and breathing room. If this feels like an overwhelming project, consider hiring a professional organizer or invite a few friends to help sort and giveaway belongings that are ready to move on. There are a lot of fun ways to get organized along with DIY projects that will keep your home looking bright and welcoming.

Staging is almost always worth the effort when it’s time to bring your home to market. Consider hiring a professional stager or invite a few friends to help you tackle the job. The goal is to create a welcoming space that feels like home but also feels like anyone’s home. Potential buyers will want to picture themselves in your space, which means family pictures and personal style might need to be on pause.

Summary

When you’re getting ready to update your home, take the opportunity to increase the value of your home at the same time. Curb appeal, fresh paint, and decluttering your home can generate buyer interest and offers. Likewise, kitchen and bathroom remodels, adding square footage, and making your home energy-efficient can increase the value of your home and get you a higher appraisal.

If you’re looking to sell your home, talk with your realtor to decide the best place to invest your dollars. And if you’re looking to stay, connect with a mortgage advisor to talk about mortgage and refinance options. A local mortgage expert can help determine the best path to access your equity and fund your renovations.

Next Steps

Consider how you want to fund your home renovations and upgrades. You can access your home equity by refinancing with cash-out, applying for a home equity loan, or even a home equity line of credit. We can help you decide which path will save you the most money and increase the value of your home. Connect with a local mortgage advisor to get started. We’d love to help.

7 Ways to Increase the Value of Your Home

September 14, 2021

Deciding to increase the value of your home is always a good move, whether you’re getting ready to sell your house or renovate for the long term. For a lot of homeowners, upgrades and renovations are par for the course.

Let’s face it, over time, our homes become outdated, weathered, and need a fair amount of maintenance. But which upgrades are worth the effort when you want to increase the value of your home?

This past year, homeowners are spending more and more time at home, working remotely, taking on DIY projects, spending time with friends and family. At the same time, many are deciding to relocate and list their home for sale.

Whether you’re planning to relocate or stay put, here are the top 7 ways to increase the value of your home.

TOP 7 WAYS TO INCREASE THE VALUE OF YOUR HOME

1. Add square footage to your home.

Increasing the usable square footage of your home will directly improve your home’s value. Home appraisals evaluate the livable square footage of a home in addition to other comparables in the neighborhood (such as the number of bedrooms and acreage). Therefore, adding a bedroom or an office will automatically increase the value of your home by the added square footage.

Another thing to consider is adding an in-law unit or ADU to the property. In a neighborhood with limited space, adding livable space will increase the value of your home and boost the appraised value (which we blogged about here).

2. Improve your home’s curb appeal.

Curb appeal doesn’t always translate to a higher home value in a formal appraisal. However, curb appeal has a huge effect on buyers when they visit a home for the first time. So when you compare a handful of homes with similar square footage in the same neighborhood, curb appeal pulls more buyers and generates higher interest. In short, strong curb appeal leads to better offers when you’re getting ready to sell your home.

Landscaping is the path to your front door. Make sure to tidy up the yard, plant some seasonal flowers, keep the grass maintained and freshen up any ground cover. Larger expenses might be fixing walkways or driveways or adding more substantial landscaping. The goal is to get a buyer to stop and shop!

3. Add a fresh coat of paint to your home’s interior and exterior.

Right along with curb appeal, giving your home a fresh coat of exterior paint will improve the perceived value and tell prospective buyers that your home is well-cared for and maintained. Move toward neutral colors that are current for the times and don’t forget your front door.

Interior paint is one of the lowest cost updates you can do to bring a big return. If you’re selling your home, you might need to lean neutral and put a pause on bold choices. Bold colors and personality are beautiful if you’re planning to stay! But for prospective buyers, the interior colors and paint should be welcoming and neutral—a home they can see updating with their own style.

Renovating a fixer-upper? The Fannie Mae Homestyle loan might be a good fit (which we blogged about here).

4. Remodel your kitchen with a modern take.

A kitchen remodel can be costly no matter how you slice it. Often, updating cabinets with a fresh coat of paint and new hardware can have a big impact. Next, update lighting fixtures and replace countertops if they’re worn or outdated.

A bigger remodel can be worth it for many homeowners, especially if you want to stay in your home for a long time. Consider updating your appliances for both aesthetics and energy efficiency. Flooring, countertops, and adding square footage are next on the list. There is a large range of costs vs. value when it comes to kitchen remodels, so work with your realtor if you’re getting ready to sell your home.

Minor kitchen remodels are expected to bring an 80% return, while major remodels have an estimated 48% return on the investment. The value will increase over time as equity builds, so consider this if you’re looking to sell quickly.

5. Give your bathroom a fresh feel.

The bathroom is one of the most important spaces to consider if you want to increase the value of your home. The good news is that small changes can make a big difference. Consider a minor remodel, including fresh paint, updated hardware and lighting, or even DIY bath and shower updates. If you want to increase the value of your home, think about expanding your bathroom or adding updated features like a walk in shower or soaking tub.

For larger projects such as heated flooring and custom fixtures, most homeowners see a 52% return. As your equity grows, the impact will increase as well. Finally, an updated bathroom can increase interest and generate offers much faster. Updating the bathroom should be at the top of your list.

6. Make your home more energy efficient.

There are a lot of options to increase the value of your home and make it more energy-efficient. Consider installing a smart thermostat, improving insulation, and replacing old windows. Take notice of attic insulation and roofing to decide if updates are needed, as well as updating to energy-efficient appliances in your home. Upgrades will improve the comfort and efficiency of your home and also save on utility bills.

Consider adding energy-efficient technologies and safety features. “Smart” technologies are becoming more popular among buyers who are energy-conscious and value home security. Smart tech doesn’t always increase the value of your home for a mortgage refinance appraisal, but new buyers are typically willing to pay more for a modernized home.

7. Get organized! Set a time to declutter and stage your home.

Organize and declutter to give your home newly found space and breathing room. If this feels like an overwhelming project, consider hiring a professional organizer or invite a few friends to help sort and giveaway belongings that are ready to move on. There are a lot of fun ways to get organized along with DIY projects that will keep your home looking bright and welcoming.

Staging is almost always worth the effort when it’s time to bring your home to market. Consider hiring a professional stager or invite a few friends to help you tackle the job. The goal is to create a welcoming space that feels like home but also feels like anyone’s home. Potential buyers will want to picture themselves in your space, which means family pictures and personal style might need to be on pause.

Summary

When you’re getting ready to update your home, take the opportunity to increase the value of your home at the same time. Curb appeal, fresh paint, and decluttering your home can generate buyer interest and offers. Likewise, kitchen and bathroom remodels, adding square footage, and making your home energy-efficient can increase the value of your home and get you a higher appraisal.

If you’re looking to sell your home, talk with your realtor to decide the best place to invest your dollars. And if you’re looking to stay, connect with a mortgage advisor to talk about mortgage and refinance options. A local mortgage expert can help determine the best path to access your equity and fund your renovations.

Next Steps

Consider how you want to fund your home renovations and upgrades. You can access your home equity by refinancing with cash-out, applying for a home equity loan, or even a home equity line of credit. We can help you decide which path will save you the most money and increase the value of your home. Connect with a local mortgage advisor to get started. We’d love to help.

Refinancing an FHA Loan to a Conventional Loan

May 3, 2022

mortgage blog, refinancing, fha loan to conventional

As inflation rises and housing inventory continues to decline, refinancing can be a smart financial move for a lot of homeowners. Especially if you have an FHA loan. Many first-time homebuyers get approved for an FHA loan for their first mortgage. An FHA loan traditionally offers strong advantages for first-time homebuyers such as a low down payment, use of gifted funds, and flexible requirements to qualify. After a few years, though, you might be in a better financial situation with more options. Perhaps you have more home equity, a better credit score, higher income, or your career has taken off. With mortgage rates rising, is now a smart time to refinance an FHA loan to a conventional mortgage?

Refinancing an FHA loan to a conventional loan can lower your mortgage payment among other benefits. If you’ve been considering refinancing an FHA loan, keep reading.

Advantages to Refinancing an FHA Loan to a Conventional Loan

If you have more than 20% equity in your home, a stable income, and a good credit rating, refinancing to a conventional loan could save you a lot of money.

In short, conventional mortgages have more strict requirements to qualify, but they also have lower mortgage rates and more flexible loan terms. A conventional mortgage could help you eliminate mortgage insurance payments, secure a lower rate, and even pay off your loan faster. This could amount to thousands of dollars in savings for many homeowners today.

Learn the detailed benefits along with the pros and cons of conventional mortgage which we blogged about here.

Drawbacks to refinancing an FHA loan to a conventional mortgage

The two main disadvantages to refinancing an FHA loan are closing costs and private mortgage insurance. First, closing costs include substantial one-time fees that may eclipse any expected savings. Second, if you don’t have at least 20% equity in your home, private mortgage insurance (PMI) will still be required with a conventional mortgage.

FHA Streamline Refinance: Top Alternative for Refinancing an FHA Loan

For many homeowners, qualifying for a conventional loan might not be possible. In other cases, you might qualify for a conventional loan, but it might end up costing you more to make the switch. In this case, the FHA streamline refinance is a great option for homeowners with a higher mortgage rate than current market rates.

The FHA Streamline is just what it sounds like: a streamlined process to refinance your FHA loan. Loan approval criteria are less strict, and most homeowners are not required to verify income, credit, or submit a home appraisal. This is a huge relief for many homeowners, and it keeps the cost of the refinance down as well.

FHA streamline refinance requirements:

Current mortgage must be an FHA loan
Mortgage payments must be current and on-time for the past six months
There must be at least 210 days since your FHA loan initially closed
Refinancing must result in a “net tangible benefit” such as a lower monthly payment
FHA mortgage premiums will still be required

Worth noting, an FHA streamline refinance doesn’t allow homeowners to take cash out.

Working with a qualified mortgage advisor who understands your situation is the best decision you can make. An experienced mortgage advisor can recommend home loan refinancing options to save you money and keep the process stress-free.

Summary

Refinancing an FHA loan to a conventional loan can save you a lot of money, get rid of mortgage insurance, and even secure a lower mortgage rate. But it’s not the best solution for every homeowner. Pay attention to closing costs, the pros and cons of a conventional mortgage, and recommendations from a qualified mortgage advisor. Finally, make sure to check out the FHA streamline refinance, especially if you have less than 20% equity right now.

Next Steps

When you’re thinking about refinancing a mortgage, an experienced mortgage advisor can help you decide whether or not a conventional mortgage is the best option. Connect with a mortgage advisor to discuss your options and build a custom mortgage that saves you money. We’d love to help.

Tag Archive for: refinancing

TOP 5 HOME REMODEL STRATEGIES TO STAY ON BUDGET

1. Keep the scope of the project in check.

2. Expect new fees for building permits and current building codes.

Find out how much you can afford (it’s free).

3. Plan for structural repairs and hidden damage.

4. Increase your budget for weekend getaways and eating out.

5. Set aside extra funds to update your Homeowner’s Insurance.

Helpful advice from friendly mortgage experts.

What’s the best way to pay for a home remodeling project?

Start your application in less than 5 minutes.

Taking Action

TOP 5 HIDDEN COSTS OF A HOME REMODELING PROJECT

1. Changing the Scope of the Project

2. Building Codes and Permits

Find out how much you can afford (it’s free).

3. Eating Out and Moving Out

4. Surprises and Structural Changes

5. Homeowner’s Insurance

Helpful advice from friendly mortgage experts.

Why is home remodeling so expensive right now?

What’s the best way to pay for a home remodeling project?

Start your application in less than 5 minutes.

Taking Action

TOP 5 QUESTIONS ABOUT BUYING MORTGAGE POINTS

1. How does it work if I decide to buy mortgage points?

Find out how much you can afford (it’s free).

2. A sample scenario for a fixed-rate 30-year mortgage.

3. Is it always a smart move to buy mortgage points?

4. Should I make a bigger down payment instead of buying points?

Helpful advice from friendly mortgage experts.

5. If I buy mortgage points, will the amount be tax deductible?

Summary

Start your application in less than 5 minutes.

Taking Action

TOP 7 QUESTIONS ABOUT REVERSE MORTGAGES (answered)

1. What is a reverse mortgage and how does it work?

Start your application in less than 5 minutes.

2. When is a reverse mortgage a good idea?

3. Do I need to make monthly mortgage payments on a reverse mortgage?

Refinancing? Know your options.

4. Who is eligible for a reverse mortgage?

5. How do I access funds with a reverse mortgage?

6. Who pays off a reverse mortgage if the property owner moves or passes away?

7. What happens when you sell a home with a reverse mortgage?

Helpful advice from friendly mortgage experts.

Taking Action

TOP 7 QUESTIONS ABOUT REVERSE MORTGAGES (answered)

1. What is a reverse mortgage and how does it work?

Start your application in less than 5 minutes.

2. When is a reverse mortgage a good idea?

3. Do I need to make monthly mortgage payments on a reverse mortgage?

Refinancing? Know your options.

4. Who is eligible for a reverse mortgage?

5. How do I access funds with a reverse mortgage?

6. Who pays off a reverse mortgage if the property owner moves or passes away?

7. What happens when you sell a home with a reverse mortgage?

Helpful advice from friendly mortgage experts.

Taking Action

Home Equity Basics

Home Equity for Home Renovations, Repairs, and Remodels

Start your application in less than 5 minutes.

Top Advantages of a Home Equity Loan

Top Advantages of a HELOC (Home Equity Line of Credit)

Find out how much you can afford (it’s free).

Taking Action

TOP 7 WAYS TO INCREASE THE VALUE OF YOUR HOME

1. Add square footage to your home.

2. Improve your home’s curb appeal.

Start your application in less than 5 minutes.

3. Add a fresh coat of paint to your home’s interior and exterior.

4. Remodel your kitchen with a modern take.

5. Give your bathroom a fresh feel.

Find out how much you can afford (it’s free).

6. Make your home more energy efficient.

7. Get organized! Set a time to declutter and stage your home.

Summary

Next Steps

TOP 7 WAYS TO INCREASE THE VALUE OF YOUR HOME

1. Add square footage to your home.