Refinancing your home can help several situations. I remember growing up and my parents refinanced our house to pay off their cars and do a little work around the house. Of course that was before homes values plummeted and equity became a thing of the past. Now homeowners are much more restricted on home equity lines of credit. In fact, if you want to finance home improvements you're probably going to need to research a different option. It's called the 203k and it's from FHA.
With this mortgage loan option, you can finance all kinds of repairs, renovations and improvements right into the life of the home mortgage. This means you're paying one monthly payment and one interest rate - which happens to be tax deductible. Let's take a look at 4 reasons you'd consider refinancing your home into a 203k.
- Your home has little-to-no equity but you want to remodel. Paying for home improvement projects with a home equity line of credit (HELOC) is great - when you actually have equity built up in your home. However, in today's housing market equity is a rarity. The 203k loan amount is based on after-improved value. This means your loan amount gets based on equity after the home improvements have added value!
- Your basement is damp and may have mold. The 203k can help eradicate mold (well you can finance the work, the mortgage doesn't actually get rid of your mold) and waterproof the lower level. If you're noticing moisture in the basement or smelling mildew, it may be time to take care of the problem.
- Your roof needs repair and possibly replacing. Sure, it may look easy to climb up on the roof of attach a few shingles. But it's difficult work. It can be expensive, too. Roof repair is eligible for 203k financing.
- You paid cash for a foreclosed home only to realize it needs a lot of work. With a large amount of housing stock on the market today bank-owned and vacant, paying cash for a house is much more common than it used to be. Of course these are "as is" purchases, sometimes with no prior inspection. Since these homes more than likely need repairs and renovations, you're now stuck with a house in need of TLC and no cash-on-hand. This problem is solved with a 203k refinance.
These are just 4 reasons to refinance your home with the 203k. You can actually finance many more home improvement projects with this renovation loan. In fact you could pay for projects like replacement windows, a new deck, kitchen remodeling or room additions. You can even add a garage with the 203k.
Learn all about this home improvement financing option with "The FHA 203k Survival Guide." The free eBook covers all aspects of the 203k. And remember: it's not just for new purchases. You can refinance and remodel with it!
(house photo: Flickr user Sebastiano Rametta)