Remodeling a home provides benefits, whether you plan to stay in the home or sell it shortly after finishing the work. Young homeowners who have enough equity in their home can consider refinancing the mortgage to free up cash for a remodeling project. Refinancing enables you to restructure your mortgage to cash out your equity. You can then use the money to pay for your remodeling work. Weigh the options carefully to ensure that you won’t pay more money in the long term with additional interest over the loan period.
Contact contractors in your area and request quotes for the remodeling work you want to do. Get at least three quotes in writing, ensuring that they include all materials and labor to finish the work completely. Ask the contractors for references and proof of regulatory compliance.
Check the references and licensing of all contractors you are considering. Eliminate any contractors if you find negative information or references.
Choose the contractor with the quote that fits your needs and budget.
Approach the lender with which you hold your mortgage with the quote in hand to inquire about refinancing. Ask about terms, closing costs, fees and interest rates for refinancing. Take notes about the offer you receive from your lender. Approach two or three additional lenders with your quote to inquire about financing your remodel. Zero in on the financing offers with lower interest rates.
Apply for refinancing with the lender that has the most attractive terms. Provide financial information to enable the lender to verify your income and assets. Proceed through the underwriting process, which involves appraising your home to verify its value and your equity. As long as the numbers work, you should receive an approval.
Close on the refinancing loan of your home. Sign all applicable papers and pay any fees. The lender will pay off your existing mortgage and you will cash out the additional money from the equity earned. The lender may place these funds in an escrow account to hold during the remodel process.
- Use a calculation tool to determine whether refinancing makes financial sense for you. Compare the terms of your existing mortgage and a new mortgage and then make your decision.
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