|Written by Beth Ploof, Mortgage Originator |
for Michigan Community Credit Union
With Spring just around the corner, I often find myself procrastinating, putting off those pesky projects that I will complete during “Spring Cleaning”. As I make a mental “to do list”, dreams of bigger and better elements such as quartz counter tops, a garden tub with jets, a three season room etc., start to creep into my thoughts. Before I even realize what is happening, I have created the image of my dream home, and before I know it the rationalization of why I need these features in my home has taken place. It’s time to get started, first order of business, finding the money to do it!!!
Everyday we are reminded that mortgage interest rates are at an all-time low, in addition to the bombardment of advertising for Home Equity Loans. It is important to understand the advantages of the loan programs available that can help us to finance the new kitchen cabinets and walk-in closets.
Cash-Out Refinances replace an existing mortgage, and lends additional funds for other uses, such as home improvement projects. Cash-out refinancing is a good option for homeowners when more favorable terms can be obtained on the new mortgage, for example a lower interest rate or fixing an Adjustable Rate Mortgage(ARM) that may be resetting soon.
A Home Equity Loan is a better option than refinancing when the existing mortgage has a good rate and favorable terms, and changing it doesn’t justify the costs associated with a major refinance. A fixed-rate home equity second mortgage delivers a lump sum to the borrower at closing, a fixed-rate, and equal payments for the life of the loan.
A Home Equity Line of Credit (HELOC) is another form of second mortgage that homeowners can tap into for additional funds. This loan program differs from a fixed second mortgage in that it is a revolving line-of-credit. Like a credit card, borrowers are approved up to a specified limit and they can borrow as needed. The adjustable rate moves with the financial markets, and the current rate and amount borrowed determine the payment each month. The line-of-credit can be paid down and drawn-up as needed.
In addition to the programs for those who want to make home improvements, there are programs available to those who need to make improvements. The Federal Housing Administration offers a first mortgage (FHA 203(k)) that will lend funds beyond the value of your home. With this program, you may also incorporate energy efficient features to help reduce monthly utility bills.
The Michigan State Housing Development Authority offers the Property Improvement Program (PIP) which offers low interest loans for home improvements. The improvements that can be financed with this loan are limited to improvements that “substantially” protect or improve the basic livability or utility of the property.
If quartz countertops are in your dreams, or your children are dreaming of a new swimming pool, there are affordable financing options that can help to make these dreams a reality!