Make The Government Pay For Your House Repairs

If you live in a home any length of time, you will need to do some renovations. Light fixtures quickly become outdated. Heating systems age and need replaced. What about an addition to accommodate your growing family? The biggest problem that most people face is having the money to do the much-needed repairs. Home improvements are not cheap.

Refinancing Is A Good Option

Many people finance their first loan to take out enough money to finance their repairs. However, you will be paying for those repairs long after the shine from the new has worn off. Financing a new kitchen will be a very expensive remodel. Spread that over 30 years and you will need to replace it again before you pay it off the first time. On a typical loan, it will take more than 10 years to make any progress on the principal. However, there are ways around this.

If refinancing is the best option for remodeling costs, then consider taking out a 25-year or shorter term on the original loan. Another option is to make additional payments on the principal. It is also important to consider that if you borrow money for home improvements, you may run out of cash before the renovations are complete. You will not be able to get any loans until the home is livable.

Depending on your lender and your credit rating, a lender will allow you to borrow 80-90 percent of your home equity. There are some closing costs to consider, but those can be rolled into the loan. If the original loan was lackluster, refinancing may even get you a cheaper payment. Per the Freddie Mac's Primary Mortgage Market Survey, a 30-year loan’s interest rate is around 3.9 percent, while a 15-year loan’s interest rate is 3.1 percent.

Other Options For Home Improvements

If refinancing your home is not an option, don't fret. Here are some other ways that you can get your much-needed remodeling completed.

Cash: Cash is king! If you can afford to work a little at a time, you can fund your whole venture. Depending on your budget, you can use your own money and not owe any interest.

Home Equity Credit: If you have any equity in your home, you can take out an equity line of credit. Most equity lines are good for about 10 years, and they can be renewed too. You can make payments from this line as needed. Keep in mind, if you don't make your payments, you will lose your home.

Home Equity Loan: Unlike a line of credit, a home equity loan is one lump sum against the equity in your home. You will be required to make a payment on this amount every month. Terms are usually between 5-15 years in length. The average interest rate is 5.22 percent.

Construction Loan: These loans are used to built or make renovations to a home. They don't have the best interest rates, but they are difficult as the money is released in stages of completion.

Credit Cards: If you have a card with a low introductory rate or that offers rewards, financing your home improvements may be beneficial. Even if you do have cash, getting the rewards from the card may more than pay for the interest rate costs. Additionally, it can be wise to use credit cards if they are paid off in a timely manner.

A 203k Loan: When a home requires a lot of repairs, a 203k loan can be helpful. These loans are government-backed to help restore old and abandoned properties. They will lend up to $35,000 for simple repairs. To qualify, you have the same requirements of an FHA loan.

FHA Title 1 Loan: Homeowners that don't have any equity in their home can use an FHA Title 1 Loan. These loans offer up to $25,000 and terms that allow repayment over 25-years. These loans are insured by the Federal Government, so they offer great rates.

Borrow From Your 401(k): Another great option is to borrow from your 401(k). You can pay yourself back over the course of five years. You pay the interest to yourself. Consequently, if you leave your job, you will be required to pay the balance due immediately.

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