Nine Tips for Using a Home Equity Loan or Refinance to Remodel Your Home

With low current mortgage rates and home contractors looking for business, many homeowners are refinancing or using home equity loans or lines of credit to remodel their homes. Here are some tips to help you if you're considering doing the same.

Mortgage rates are still very low, and many homeowners with significant equity in their homes are looking at taking advantage of the current rates and economy to remodel their homes.

Adding square footage, updating and remodeling a kitchen or bathroom, or completing major repair to the exterior of your home can add value and improve your living space.

Nine Tips for a Smooth Home Renovation

Here are some tips to follow if you are considering remodeling or renovating using a home loan:

  1. Use a mortgage calculator to determine the mortgage payment you can handle in your monthly budget after adding a home equity loan or line of credit. A refinance calculator will help you determine the effects of a home loan with a lower interest rate and your current payment.
  2. Before creating plans and entering into a contract, get preapproved for your new refinance mortgage or home equity loan or line of credit.
  3. Have a clear idea of what you want before you interview contractors.
  4. Be realistic. You may not have the budget to do all you want to do. After you are preapproved, you'll know exactly how much you have available to spend.
  5. Note the names and numbers of contractors when you see construction and remodeling in your neighborhood. Go onto the sites and speak with the subcontractors.
  6. When interviewing contractors, give them your objective and plan--and your budget. Do not let your contractor drive your costs and budget, but do let them know how much you have to spend.
  7. Before selecting a contractor, ask for references, and go visit their job sites. Ask many detailed questions of the homeowners for whom they have completed work: Did they keep a clean site? Did they show up on time? Was the job finished on time and on budget? When finished, did you need to call them back out to fix anything? How quickly did they come back out?
  8. Get referrals from friends, family, and even local real estate professionals. Don't just flip through the phone book.
  9. Do not make your decision based solely on price! Remember the cliche: you get what you pay for. It is better to contract with an honest contractor who charges more but stays on time and on budget than become the Nightmare Remodel--over time, over budget, and unsatisfied with your result.

Use your mortgage calculators, get pre-approved to set your budget, and do extensive research on your contractors. While these may not guarantee the perfect remodeling experience for your family, they will ensure you are properly prepared.

Posted By :
Dennis is co-owner and broker of record for Stratis Financial in Southern California. With over twenty years experience in the mortgage industry he has helped homeowners save millions of dollars refinancing their homes. Dennis has a degree in Economics and Political Studies from Pitzer College and is married with two children.

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