Doing some remodeling can really increase the value of your home for the market, but where can you come up with the money for it? Depending on what you’re planning on having done and how much it will cost, you can pay for it upfront with cash or refinance your mortgage.
Here’s a look at paying cash vs. refinancing your home loan, so you can better understand the pros and cons of each approach:
- Paying cash can make it quicker for you to get started on your remodeling project, but you’ll have to factor in more research time. People who pay with cash are much more cautious about who they hire and what exact costs are involved, such as labor and materials.
- Refinancing your home loan means that you’ll be limited on how much you can spend on remodeling. This loan-to-value ratio refers to the maximum amount you’ll have available for financing. In general, you’ll likely be limited to borrowing up to 80 percent of the home’s value.
- Refinancing isn’t a good option if you’re not planning on staying long. This option works better for those who have decided to remain in their house for a longer period of time before selling. If you want to sell in the near future, pay cash or look for alternative means to cover the cost of remodeling, such as a personal loan.
When it comes to paying cash vs. refinancing your home loan, you’ll need to take a good long look at your finances and your plans for your current home.
Looking for more advice on increasing your home’s value for when you decide to sell? Contact Donna Hatch at dhatch@erashields.com.
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