When it comes time to start the remodeling process for your Minneapolis home, the biggest obstacle is deciding how to fund it. Not everyone has equity built into their home, which would help offset costs, so here are a couple ways to pay for your next real estate project.
- Cash-Out Refinance – the best choice if you have the ability to piece together funding from different sources, like cash, family loans, etc. After all is said and done, the first mortgage can be refinanced, thus tapping into the increased equity you created by improving the home and giving the ability to pay off any creditors.
- Credit Cards and Store Loans – if you have a small enough project that can be financed by a credit card, this might work for you. Some home improvement stores offer cards with up to a $30,000 limit, which are interest free if you pay them up to a certain date. If you know you can pay off the card before this date, then you can save all the interest that has accrued. Remember, only do this if you can pay it off!
- Home Equity Line of Credit – while these loans usually carry a higher interest rate, they are great for smaller projects. A line of credit has the money available to you, but allows you to draw out the cash as you need it. A Home Equity Loan gives you all the cash at once. Remember though your home must appraise for the amount you borrow.
- Construction Loans – five years ago, these loans might have been hard to find, but today many more banks offer them for remodeling projects. They are great for large projects and we used one for the last historic home with remodeled. It is only a short, temporary fix for financing because when construction is complete, you will have to refinance both this loan and your first mortgage into one. Remember to ask the lender if they can construct is so the construction loan rolls over into a permanent loan, thus saving from having to pay two sets of closing costs.
Any of these will most likely work for you, but remember to check with your financial advisor and loan officer on what will be the best fit for you pocket book. The last thing you want to do is choose the wrong type of financing, then find out you are short on funds to finish the project.