Refinancing - Accessing the Equity in Your Home
Do you need access to additional funds? Using the equity in your home can be a cost effective way to access extra funds. Equity is the difference between value of your home and how much you owe the lender. Currently lenders will allow you to borrow up to 80% of the appraised value of your home when you are refinancing. So when you refinance a mortgage on your home, you will pay off the original mortgage and replace it with a new one. There is a good chance the new mortgage will have a lower rate than your existing mortgage. You can then use the extra equity (cash) in your home to cover major purchases such as investments, buying additional property, college tuition, taking a vacation or perhaps buying a new vehicle or boat. Perhaps you need funds to start a business. Or you may wish to use the equity to pay out high-interest debt such as credit card bills, car loans, and unsecured lines of credit. By consolidating high-interest debt into your mortgage at a lower interest rate you can save money and simplify your budget by having just one payment. Again, another reason you may wish to look at refinancing is to simply secure a lower interest rate as mentioned above. Breaking your contract for a lower interest rate can save you money over time. Another option is to establish a home equity line of credit with a refinance. This will allow you to have ongoing access to funds at a lower interest rate because the line of credit is secured by the equity you have built in your home. Lenders will allow you to take up to 65% of your homes value in a line of credit. If you require a refinance to 80% of your home value the remaining 15% can be a fixed or variable rate product.
Keep in mind that you have to qualify for the new mortgage amount and you need to have enough money to cover any related expenses. Every mortgage, including a refinance will have legal fees associated with it. If you are breaking your existing mortgage contract early there will be a prepayment penalty. For fixed rate mortgages it is the greater of three months interest or the interest rate differential (IRD). For variable rate mortgages it is three months interest. If you choose to refinance when your mortgage is available for renewal there would be no penalty.
When you refinance, you may choose to increase your amortization to 25 or 30 years and in some cases 35 years with select lenders. This will reduce your payment and can be financially beneficial if you are in a season of your life where your expenses are higher. Or if you wish to pay off your mortgage sooner you can reduce your amortization or increase your payment frequency. As mortgage professionals we would be happy to assist you with reviewing your financial needs and goals.
Top five home renovations that increase property value
Looking to increase your homes property value? Here are five of the best renovations you can do to your home to increase property value. These five renovations can sometimes have a return on investment 5-6x what they cost.
Flooring is one of the most important aspects of your house. You will see an immediate rise in property valuation with the installation of hardwood floors. Existing hardwood floors that you can refinish are ideal as they are less costly to restore and in higher demand than new flooring materials. For the bathroom, tile will always be in demand and retain value exceptionally well.
Kitchens often look tired and dated, in large part due to old fixtures. Replacing or updating cabinet hardware, light fixtures, countertops and faucets will result in an immediate increase in your homes value. This small, but effective upgrade will also revitalize the entire home. Pot lights are in high demand in open concept style homes.
Thebathroomis the second most important room in the home in terms of valuation. If you can add a three-piece bathroom to a home with only one full bathroom, you will see a dramatic rise in the market value of your home. While you should never compromise bedroom space for a bathroom, try sneaking one in dead space in the home. Scott managed to fit in a 3-piece bathroom under a staircase the width of the room measured just 44 inches. As an added tip, use glass for the shower to make the bathroom feel more spacious.
Kitchens are the single most important room in the home relating to valuation. The kitchen can make a significant difference in the value of your home. As such, it is crucial that you invest in having a modern, fresh anddesirable kitchen. Modern cabinetry, under cabinet lighting and new appliances will all significantly increase the value of your home on the market. To save on cost without compromising construction and desirability, look at options like Ikea cabinets as opposed to custom cabinetry.
#1 An Income Suite
No surprise, but the single biggest way to increase the value of your home is to build an income suite within the property. Whether this is converting yourbasement into a rental, or another floor in the home, an income property will increase your homes worth. The main reason for this is that it covers a portion, or sometimes all of your mortgage payments, and results in your home being cash flow positive which creates real wealth that can supplement your income.