One of the most popular reasons to get a 2nd mortgage is to pay for home improvements or remodeling. Homeowners have more access to tax deductions when the make house repairs or remodel utilizing a 2nd mortgage which many banks and finance companies consider a "home improvement loan." There may be no better way to leverage the tax laws while improving the residential real estate property that you own.
We can direct you to the Top lenders in the country. We can help find you loan to do the improvements for your home. Use Your Home's Equity to Get Cash, Consolidate Your Debts, Improve or Remodel Your Home.
Using the equity in your house to finance improvements, construction and remodeling is a wise decision for homeowners looking to maximize tax deductibility while increasing the value of their investment. Learn how to improve your house with a home equity line of credit.
Do you want to improve your home? Now is a good time; home values are on the rise in 2019, and if you improve your home, you could add substantially to its value when you sell it. But many people are unaware of the many rehab loan options that can help you to pay for your home improvements, and many of the options are more affordable than you might think.
Below are the best rehab loans to consider for home improvements, remodeling and construction.
Another popular way to finance your home remodel is to take out a second mortgage, which can be a home equity loan or a home equity line of credit (HELOC). A home equity loan is a one-time, lump sum of cash with a fixed interest rate. Monthly payments will not fluctuate with a home equity loan.
You also can get a HELOC, which is a line of credit and has a revolving balance. It could be better for someone who has to make several big payments over time, such as with a major home improvement project. Interest rates on a HELOC can fluctuate, although the interest rate in the early months of the loan is usually lower than a home equity loan.
With either option, you are making your home the collateral for the loan. So, if you do not make the payments, the lender can take your home. Another option is to take out an unsecured personal loan, so you do not have to risk your home. A personal loan can have competitive interest rates if you have good credit.
Homestyle and FHA 203k loans do have some advantages over second mortgages. The loan amount with either of these options is based upon the completed value of the home, not the present value. A home equity loan is based upon the current value. So, you can get more money in many cases with the Homestyle or FHA 203k loan.
The last major option is a refinance with cash out of your first mortgage. Your first mortgage will now be for a higher amount than your original, and you get the difference in cash.
A cash out refi has your home as collateral, but if you have a lot of equity in the home, you could find a lower interest rate. With the combination of lower interest rates and additional value to the home with the repairs, you could save money in the long run. You do need to have at least 20% equity in the home to qualify for a cash out refinance.
FHA 203k Loan
Another good option is the FHA 203k loan. This loan usually has a lower credit score requirement than the Homestyle loan has. There also is only a 3.5% down payment requirement.
There are two major types of FHA 203k loans:
A limited 203k loan is intended for cosmetic enhancements and is capped at $35k. A standard FHA 203k loan is for major remodeling, but it will require you to have a licensed 203k consultant oversee all stages of the work. There is more security in having the project overseen by this consultant. The consultant is the project manager and will assess the cost, plans and provide total oversight. This helps to keep the project on target and on budget.
Fannie May Homestyle Loan
This is one of the best loans for all types of home improvements. The Fannie Mae Homestyle loan allows you to buy a home that needs repairs, or you can refinance your existing home to pay for the improvements.
This loan is available from any lender that is approved to do Fannie Mae loans, but there are some key requirements to qualify:
One plus of this loan is that it is just a single loan. You do not need to take out a home loan and then another loan for your renovations. This will reduce your closing costs and paperwork.
The money that is going to fix the home will be put into an escrow account that will pay the contractor in several stages. You do not have personal access to these funds as you would with a home equity loan.
Choosing the Best Home Rehab Loan
How do you know which to choose for your home renovations? A lot of it, experts say, comes down to your credit and eligibility. The 203k loan could be best for the borrower with poor credit and little money to put down. A Homestyle loan could be better for a person with more credit and money to put down. A second mortgage can work well if you have a lot of equity, but do not want to refinance your first mortgage because you like the interest rate you have. A cash out refinance of your first mortgage could work well if you have a higher interest rate and can refinance into a lower one.
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Florida: Housing Sector Rebound? Florida real estate started to slow in 2005, ahead of many other parts of the country. And now some real estate practitioners say the state is still ahead of the curve, leading resurgence in sales.
Ann Rogers, who owns three Pinellas County Keller Williams franchises, says the home inventory isn’t growing because houses are selling at about the same pace that sellers are putting them on the market.
Developer Brandon Pastilong has already sold four of the eight townhomes he’s building in a remote part of St. Petersburg. They are priced at $300,000 to $350,000.
"We feel the housing market doesn't have much more to drop," says Verne Packer, who is building a 30-unit condo complex. Packer is trying to time the market, relying on a construction technique that allows him to put up a home in less than a week. He doesn't have final pricing on his development, but he says the 2,100 to 2,600-square-foot hurricane-resistant homes will sell for about $400,000.