+1 vote
We already have a mortgage. so this will be separate. We already have a permit and contractors lined up and ready to start the work.
asked Feb 6, 2018 in Home Improvement by Ti

2 Answers

+1 vote
The best loan for you depends on the financing you already have and the amount of home equity you've got. If you bought your home last December, you probably got an excellent mortgage rate -- you might not want to pay to refinance that whole amount all over again if you can't improve on the interest rate. And if you put at least 20 percent down, you don't have mortgage insurance, and you probably don't want to acquire it now.

If you have equity, and your renovation costs plus your current mortgage won't exceed 90 percent of your home's value, I recommend a home equity loan with a fixed rate -- easier to budget for and you pay it off over time. If your project will take place in stages over an extended time period, a home equity line of credit (HELOC) is another, more flexible way to go -- but the rate is variable. HELOCs are cheaper to set up, but riskier if interest rates rise.

If you have little-to-no home equity, an FHA 203(k) is a great mortgage for refinancing --  it bases your loan on the improved property value, not the current value. It lets you refinance and include home improvements, a good deal especially if the remodel will be extensive and the amount needed will be high.
answered Feb 6, 2018 by GinaPogol (47,650 points)
0 votes
The best route for you to go is refinancing your mortgage with a FHA 203k Loan.  It is a great loan program where we pay off the existing loan and give you construction financing all in one loan program. The maximum loan limit for both the first mortgage and construction is $294,515. Its more if you are in a high cost area. The second route for a home improvement loan is through a second mortgage and/HELOC WHICH are available at banks. However, you need equity in your home and the maximum CLTV is capped at 90% CLTV.

Gustan Cho NMLS 873293
Branch Manager
answered Feb 6, 2018 by GustanCho (106,540 points)

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