Is It A Good Idea to Pay for A House Remodel Using a Home Equity Loan?

One of the smartest things to do before selling a home is to make sure that things are in great shape before listing the home for sale. Doing this will make sure that the home will fetch a good price. However, this is not easy to pull-off for those who do not have plenty of cash that can be used to pay for a house remodel. This is where having a substantial amount of home equity helps. Homeowners with a high home equity can pay for a house remodel using a home equity loan. The question is, is this a good idea?

Why Go for a Home Equity Loan?

Unlike other loans, a home equity loan uses the value that a homeowner owns in a home as collateral. Because a home equity loan is a secured loan, it is easier approved and comes with a lower interest rate than unsecured loans. It is true that tapping home equity can be scary for some, but know that with proper planning and money management, using a home equity loan to pay for a house remodel is not only a good idea, it is a great one!

Nobody wants to sell a home for less than the price that it was bought for. The hard fact is that this is the case for a lot of people more so if the location turned bad or if the home was poorly maintained. To make sure that the home’s value does not depreciate, regular repairs must be done and some features should be upgraded periodically.

When to Use a Loan

Paying for home improvement in cash is ideal but not everyone has a large sum of money that can be used however and whenever. Using a low-interest loan like a home equity loan is the best-case scenario for a lot of people instead of taking a loss by not upgrading or taking out an expensive personal loan. Note that one should be careful with spending even when using funds from a loan secured by home equity.

Take into account that using a home equity loan to pay for a house remodel is an investment and not really an expenditure. After some much-needed remodeling and improvement, an old and dilapidated home can turn into a beautiful and functional home with a high resale value. Even an emergency remodeling or repair can turn into a sound investment when chosen wisely and done the right way.

Important Things to Note

Keep in mind that home’s value can play a huge part in what becomes of the home equity. There are many factors that are related to property value aside from renovations. With this said, using a home equity loan to pay for a house remodel that will, in turn, further increase home equity is certainly a good idea.

If you’re seriously considering tapping into your home equity, be contact professionals like us in Mortgage Central Canada. We’ll be happy to answer your questions as well as guide you in in choosing which home equity loan product is best for your needs.

Get Rich with Home Equity

Do you know that just by owning a home, you are significantly wealthier than someone who makes the same but is renting? This is because any money you pay for your mortgage goes towards increasing the value of your home equity. Your home equity is essentially your deposit or ‘forced savings’ in the form of real estate. Once you’ve paid off your mortgage, then you have a huge nest egg or savings that you can access using home equity loans when needed. Yes! You can access your home equity without having to sell your home!

Once homeowners become aware of how rich they are through their home equity, a lot of them get tempted with accessing their home equity via a loan. Note that while it is smart to use home equity for investments, improving one’s financial status, consolidating loans, and funding home renovation projects, some uses for home equity is not as smart as other uses because they don’t add value to the home, yourself, or overall financial status. It is better to be careful than sorry. Now that we’ve got this part covered, how does one get rich with home equity? Find out below!

Try Not to Move Often

Buying and selling homes come with costs. If you move houses every few years, the cost can quickly add up. By not moving too often, you save money that you can towards paying off your mortgage and therefore increasing your home equity.

Choose an Equity-Rich Home

An equity-rich home is a home that has a huge potential to increase value after a bit of improvement or one that is located in a sought-after neighbourhood with increasing property prices. An equity-rich home will allow you to grow home equity fast and for much less money, time, and effort.

Plan Improvements Wisely

There are home improvements that are nice to have and some that really make your home more desirable and valuable. You’ll have to learn to differentiate and try not to go overboard with customizations. A home with extra functionality but has room for more has more value than an overly-customized home that nobody else wants because buyers feel like they are intruding.

All About the Location

Choosing a home location isn’t just about convenience but also planning for the future. If you can, move into a neighbourhood that has better long-term forecast than another that you might really like. It is also best to choose a home in a location that can accommodate your changing needs down the road so you won’t have to move again after just a few years.

Look Forward to Being Equity-Rich

There is nothing wrong with wanting to increase your home equity and planning accordingly. There is nothing wrong with treating your home equity as a timed savings account that you can use later such as when you plan to retire. It is great to be equity-rich because you will have much more financial room for maneuvering should the need arise.

Do you need more ideas about increasing your home equity? Or do you want to use your existing equity to further boost your home’s value? Whatever you may have in mind, we can help! Contact us at Mortgage Central Canada and we’ll surely answer your questions to assist you towards better financial decisions.