Winter is coming, and as a homeowner, you may be considering remodelling your home for the colder months. But at the same time, interest rates are starting to rise and if you are going to remodel your house, you better be careful about the financing options. Housing prices have been on recovery, meaning that homeowners can borrow on the houses for a remodel.
If You Have It, Use Cash
You can tap on the home equity for home remodel projects such as updating your kitchen or adding a bathroom in your house. With interest rates ticking upwards, homeowners should consider the option of borrowing in their home equity. However, if the interests paid on savings are lower and you can afford cash, it’s better to use it to pay for your remodelling project.
HELOC or Equity Loan?
If you must finance the project, borrowing in your line of credit or taking a home equity loan isn’t the end of the world. Refinancing an existing mortgage isn’t so attractive at the moment, the interest rates are on an upward trend meaning that it will be expensive than other options. Lines of credit, popularly referred to as HELOC loans, as well as home equity loans are the most common types of loans homeowners use to remodel their homes.
The latter is more popular and functions like a traditional credit card. The former comes with variable interest rates and is more complex. Your choice of the refinancing option for your home remodelling project ultimately depends on your risk tolerance.