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With interest rates the lowest they’ve been in a while, you may be thinking about refinancing your existing mortgage into a new one. As a homeowner, there are good reasons to consider this option: to get a lower interest rate, to drop private mortgage insurance, or to pull cash from your home’s equity to consolidate debt or make home improvements. The short answer, of course, is to have more money each month for groceries, car payments and the orthodontic’s bill.
You might think that a mortgage company is going to push a home loan for every little home improvement project you may want to do. But here's the thing about doing that: not everyone needs to finance home improvements. It's a shocking truth some lenders don't want you to know. But it's the truth. Not everyone needs to borrow money for home improvement financing, just like not everyone should buy a house. Sometimes renting is better for some folks, just like some folks can perform do-it-yourself upgrades with no financing.
This is a story about how I used the refinance remodel option to get a new kitchen. Once upon a time I wanted a new kitchen. My wife and I looked around our house and realized that we'd be here for a long time, and it was time to invest some money in one of the rooms where we spent most of our time. When friends come over, we end up shooting the breeze in the kitchen. Between food prep, cooking and clean-up we're in the kitchen almost every night for at least a couple hours it seems like. So as we looked around the kitchen that looked like it was built and decorated in the 1980s we decided it was time for a remodeling project. The problem: cost.
The USDA has announced a great opportunity for homeowners with a rural development mortgage. This zero-down mortgage option is great for first time home buyers because of the 100% financing. With homeowners who went this route a few years ago, interest rates were decent - in the 8% range - but those rates have fallen near 4% now. The only problem is that in that same time period, home values have dropped so refinancing is difficult with no equity. Enter the rural development refinance program.
A homeowner who loves their house may still look around and see opportunities to upgrade. Maybe you've outgrown your kitchen. Maybe you're in desperate need of an extra bathroom. Check your windows - are they too old and in need of replacing? Paying for any or all of these projects can get to be a daunting endeavor. Sure, many projects can be done in a do-it-yourself (DIY) weekend with minimal money. But what happens if the work is beyond your skill set, time and money? That's when it's time to consider a refinance mortgage to upgrade your home.
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.