How to finance home improvements

If you don’t have money saved for your home improvements, you can pay for them with a home improvement loan.

But what type of loan, and lender, is right for you?

Below, we break down the different types of home renovation loans, so you can find one that meets your remodeling needs — and your budget.

Most important, it can help you find loans for which you qualify, even if your credit score isn’t perfect.

In this article:

• Cash-out mortgage refinance options
• Home equity loans (HELOCs)
• Government-backed loan programs
• Alternative lending options
• Financing companies and rates
• Best way to finance home improvements
• Best and worst home improvement projects
• Our recommended lenders for home loans

Home renovation loan options

Cash-out refinance

A cash-out refinance is one of the most common ways to pay for home renovations. With a cash-out refinance, you refinance the existing mortgage for more than the current outstanding balance. You then keep the difference between the new and old loans.

For example, if you owe $200,000 on a home worth twice as much, you can take out a loan for $300,000, replacing the former loan and receiving cash back at closing. The new mortgage might even come with a lower interest rate or smaller monthly payments.

There are two types of cash-out refinances: government-backed and conventional.

Conventional cash-out refinance

If you have a lot of equity in your home, a cash-out refi lets you free up a sizeable sum for expensive renovations. However, if you don’t have enough equity or your credit score is lackluster, you may find it difficult — or impossible — to qualify for a loan in the amount you need.

In general, cash-out refinances are limited to an 80% loan-to-value ratio (LTV) — the amount of the loan vs. the home’s market value. In theory, this finance type is available to people with credit scores as low as 620. In reality, many lenders set their minimums around 640 or even higher.

If you do qualify, despite a mediocre score, you’ll pay more in interest and fees than someone with an impressive credit history. For example, a homeowner with a 680 credit score and LTV of 80% will pay 1.75% of the loan amount more in fees than an applicant with a 740 score and a 60% LTV.

In other words, the better your score, and the more equity in your home, the less you’ll pay in interest.

Pros:

• Larger loan sizes (in many cases)
• Fixed interest rate. This lets you calculate the total cost of the loan — upfront

Cons:

• Higher rates than primary mortgages and no-cash-out refinances
• Closing costs can total hundreds or thousands of dollars
• A time- and document-intensive application process (similar to that for a first mortgage)

FHA cash-out refinance

Cash-out refinances backed by the Federal Housing Administration (FHA) reduce risk to lenders. That’s why homeowners with lower credit scores and higher debt-to-income ratios are more likely to qualify for the money they want.

In addition, FHA cash-outs have a maximum LTV of 85% instead of the 80% limit on most conventional cash-outs.

In theory, you can qualify with a credit score as low as 580. In reality, most lenders want to see a minimum score between 600 and 660.

Pros:        

• The 85% maximum LTV lets you borrow more money
• Fixed interest rate
• You may be able to lower the rate and change the terms while borrowing extra money — e.g., converting a 30-year fixed to a 15-year fixed

Cons:

• You will incur an upfront fee of 1.75% of the loan amount, wrapped into the new loan
• Monthly mortgage insurance required of $67 per month per $100,000 borrowed.

VA cash-out refinance

Cash-out refinances guaranteed by the Veterans Administration (VA) are similar to those backed by the FHA. The main difference, of course, is that only eligible service persons and veterans may apply. VA cash-outs can be used to refinance previous VA-backed loans and non-VA loans.

The biggest advantage to VA cash-out loans is that you can finance up to 100% of your home’s current value.

So, even if you only have 10-15% equity in your home, it still might make sense to use a VA loan for cash. No other loan program lets you get that high of an LTV with a cash-out loan.

Pros:        

• Good tool for quickly raising large amounts of cash
• Fixed interest rate
• Because VA loans do not require mortgage insurance, you can reduce homeownership costs by paying off an FHA loan and canceling your FHA mortgage insurance premiums (MIP). You can also refinance out of a conventional loanthat requires private mortgage insurance (PMI)

Cons:

• Higher rate than other types of VA-backed mortgage refinances
• A new property appraisal and income verification is required
• You need to establish eligibility based on military service

Home equity loans and HELOCs

Home equity loans

Basically, a home equity loan is a fixed-rate personal loan that is secured by your house. In most cases, you can borrow up to 80% of your home’s market value minus what you still owe on the mortgage. So if your house is worth $300,000, and you have an outstanding balance of $200,000, you can borrow up to $40,000.

On the plus side, home equity loans tend to be approved faster than cash-out refinances. They also tend to have lower closing costs. On the minus side, you may have to settle for a smaller loan and a higher interest rate.

Pros:        

• Good and fast way to raise a lump sum
• Fixed interest rate
• Loan is fully amortizing. You repay interest and principal from the get-go
• Closing costs are often lower than for cash-out refinances

Cons:

• Rates are usually higher than for cash-out refinances
• Because loan amounts tend to be smaller, they might not cover the full cost of your home improvement project, especially if you go over-budget

Home equity lines of credit (HELOCs)

HELOCs are revolving credit lines that typically come with variable rates. Your monthly payment depends on the current rate and loan balance.

HELOCS are similar to credit cards. You can draw any amount, at any time, up to your limit. You’re allowed to pay it down or off at will.

HELOCs have two phases. During the draw period, you use the line of credit all you want, and your minimum payment may cover just the interest due. But eventually (usually after 10 years), the HELOC draw period ends, and your loan enters the repayment phase. At this point, you can no longer draw funds and the loan becomes fully amortized for its remaining years.

Pros:        

• Borrow as much or as little as you need — when you need it
• Low monthly payments during the draw period
• Low closing costs

Cons:

• Variable interest rates rise in tandem with the Federal Reserve’s prime rate
• Monthly payments can skyrocket once the repayment phase begins — i.e., once you begin repaying both principle and interest on the loan

Related: More about home equity loans

Personal loans and lines of credit

There are two basic types of personal loans and lines of credit — those secured with collateral, such as your home or an automobile, and those unsecured by assets (in which case, lenders take a much harder look at your credit score, employment history and income).

Only homeowners with little or no equity have a good reason to opt for these loans, so we’ll focus on the unsecured type.

Personal Loans

You don’t put up collateral for an unsecured personal loan, so you don’t risk losing your home or car in the event of default. Otherwise, the main advantages are the relative speed and simplicity of the application and approval processes when compared with mortgage refinances, home equity loans, and HELOCs.

On the other hand, the rates for personal loans are often higher than cash-out refinances and home equity loans, and the loan amounts are usually capped at $100,000.

Pros:

• No home equity required
• No appraisal required (great if your home is in disrepair)
• Application process is faster and simpler than for other renovation financing

Cons:

• Higher interest rates, especially for those with lower credit scores
• Loan limits are up to $100,000, so may not cover all projects

Personal Lines of Credit

These are revolving lines of credit that allow you to borrow what you need, when you need it, up to the credit limit. Essentially, they function like credit cards, but without the plastic (unless they’re linked to a debit card).

Although they offer more flexibility than personal loans, personal credit lines have the same drawbacks as personal loans — and then some.

Almost all credit lines have variable interest rates, and if the rate is raised, it can be applied to your existing balance — something credit card companies are not allowed to do. So be sure to check the lender’s offer to see how often, and by how much, it can raise your rate. If you’re not careful, a once-affordable loan balance could become hard to repay.

Credit Cards

As of October 2017, credit cards have an average APR of 16.7%, with some charging up to 22.99% on purchase balances. Assuming you don’t pay the entire balance within 30 days, credit cards can be one of the costliest home renovation financing methods.

In general, there’s only one credit-card-financing scenario that makes sense, and only for smaller home renovation projects. Get a new card with an introductory zero-percent APR (the intro period is typically 12 months), use the card to pay for the improvements, and repay the entire balance before the interest rate kicks in.

Pros:        

• Near-instant access to cash
• Speedy and simple application process (for a new card)
• Interest-free loan if you find a card with an introductory offer and pay off the balance within a certain timeframe

Cons:

• High-interest rates (especially for cash advances)
• Low minimum monthly payments can encourage overspending
• Loans are typically limited to four-figure sums.

Government-backed loan programs

The 203k FHA rehab loan

These loans can be ideal for buyers who’ve found a house with “good bones” and good location, but one that needs major-league TLC.

A 203k loan allows you to borrow money, using only one loan, for both the home purchase (or refinance) and home improvements.

Most homeowners don’t know that the 203k loan can also be used to refinance and raise cash for home improvements.

The new loan amount can be up to 97.75% of the after-improved value of the home.

For instance, your home is worth $200,000 as-is. Improvements will add $30,000 to the value.

Your refinance loan amount is not limited to your current value. Rather, you could get a loan up to $224,825 (97.75% of future value).

Use the difference between your existing balance and new loan amount for home improvements (after you pay for closing costs and certain 203k fees).

If you’re in the market to buy a fixer, a 203k can help you purchase and repair a home with one loan.

Without a 203k, you would have to find a private home purchase and home improvement loan that would look more like a business loan than a mortgage. They come with high interest rates, short repayment terms and a balloon payment.

203k loans, rather, are designed to encourage buyers to rehabilitate deteriorated housing and get it off the market.

Because 203k loans are guaranteed by the FHA, it’s easier to get approved, even with a credit score as low as 580. And the minimum down payment is just 3.5 percent.

But these relaxed financial standards are offset by strict guidelines for the property. The house must be a primary residence and the renovations can’t include anything the FHA defines as a “luxury.” A list of improvements that borrowers may make can be found here.

Fannie Mae offers similar home purchase and renovation loans — the Fannie Mae HomeStyle® program — with relaxed home improvement guidelines, but stricter down payment and credit score criteria.

Because of the paperwork involved, and the requirement that you use only licensed contractors, these loans aren’t for people who want to beautify a property themselves. They are best for “hardcore” rehabilitation work.

Pros:        

• May be your most affordable option
• No home equity needed
• People with poor credit may still qualify

Cons:

• Not available to investors (forget about “flipping”)
• A lot of paperwork must be filled out by you and your contractors
• The process is time-consuming
• Aside from your planned improvements, the FHA might require you to perform additional work to meet all building codes, as well as health & safety requirements

FHA Title 1 loans

These loans are similar to the others backed by the FHA. In this case, the FHA guarantees loans made to existing homeowners who want to make home improvements, repairs or alterations.

With a Title 1 loan, you can borrow up to $25,000 for a single-family home. For multi-family properties, you can receive as much as $12,000 per living unit, for a maximum of five units (or $60,000). Loans above $7,500 must be secured by a mortgage or deed of trust.

Pros:        

• No home equity needed
• People with poor credit may still qualify

Cons:

• Maximum loan is relatively small

State and Local Loan Programs. In addition to loan programs run by the federal government, there are thousands of programs operated by the 50 states, as well as counties and municipalities. For example, the state of Connecticut currently lists 11 programs that assist homeowners with everything from financing the purchase of a home in need of repair to helping improve the energy efficiency of their houses.

Each municipality offers different programs with different terms. A quick internet search is all it takes to find such a program.

Alternative lending options

Contractor financing

Yes, your home improvement loan could be as close as the guy sitting on the backhoe in your driveway.

According to a 2016 Consumer Reports survey, 42% of general contractors provide financing options to customers. Other contractors may help you secure a loan from a third party by acting as middlemen.

The rates and terms offered by contractors vary widely, so be sure to get all the details. Then compare them with what’s on offer from banks, credit unions and online lenders.

You can also vet your contractor/lender by searching for online reviews posted by the company’s previous borrowers, as well as your state’s consumer affairs office and the Better Business Bureau. Some contractors are better at home renovation than financial services.

Peer-to-peer loans

Peer-to-Peer lending anonymously matches borrowers with lenders through online platforms such as LendingClub and Prosper. (The platforms make money by charging origination fees to the borrowers and taking a cut of the repayments made to lenders.)

For home improvement borrowers, peer-to-peer loans are personal loans that typically range from $1,000 to $40,000 and have terms of one to five years.

As for rates, personal loans facilitated by Prosper and Lending Club both start at 5.99%. From there, the sky is (almost) the limit, with Proper’s rates capped at 36% and Lending Club’s at 35.96%. Given these rates, peer-to-peer lending is not a good option for people with bad credit scores.

Assuming you qualify for a reasonable APR, P2P loans have a number of advantages. The application process is simple and lightning fast. The rates are fixed and, believe it or not, competitive with those offered by some credit cards and banks (for personal loans).

Also, because you remain anonymous to the lenders, you’ll never receive phone or email solicitations from them. Finally, there are no penalties for paying off the loans early.

Home improvement financing companies and rates

A wide array of financial services companies offer home improvement loans in the form of cash-out refinances, home equity loans, HELOCS, personal loans and personal lines of credit, including national and regional banks, online lenders and credit unions.

Below is a small sampling of lenders that offer personal loans and HELOCs. All rates and terms were as of the time of this writing and may change at any time.

Avant

Specializing in personal loans, this online platform provides access to loans from $2,000 to $35,000, with terms of two to five years. Applicants may qualify with credit scores as low as 580.

Current Rates:             9.95% — 35.99%

Fees:                            1.50% — 4.75%

LightStream

Compared with Avant, LightStream caters to personal loan applicants with excellent credit scores (660 or higher). But the stricter lending guidelines come with lower rates and no fees.

Current Rates:             2.29% — 17.49% (with autopay)

Fees:                            None

Bank of America

One of the largest companies in the world, Bank of America has operations in all 50 states, the District of Columbia and 40 other countries. So there’s a fair chance that you’ll find a branch not far from you. For a HELOC, the bank is currently offering a 12-month introductory rate of 2.990%. The rate rises to 4.430% after the introductory period.

Wells Fargo

The world’s second-largest bank by market capitalization, Wells Fargo is also the leading mortgage lender in the U.S. In 2016, the bank issued $249 billion in residential mortgages for a market share of 13%.

For a HELOC, Wells Fargo offers rates from 4.25% to 9%. The bank also has fixed rates for HELOCS, and recently instituted rate caps. It promises that the variable rate on HELOCs will never increase more than 2% annually and that the total rate increase will be limited to 7%.

Credit unions

Credit unions are member-owned financial cooperatives designed to promote thrift. Often, their loans have some of the most competitive rates and terms available. For example:

First Florida Credit Union offers 20-year HELOCs for rates as low as 4.25%. For a similar HELOC, Affinity Plus Federal Credit Union, which serves Minnesota residents, currently advertises rates as low as 4.5%.

Cash Out, home equity loan or personal loan?

To choose the type of loan that’s best for your home improvement needs, do a basic costs-benefits analysis after asking yourself these questions:

• How much money do I need?
• How much home equity do I have?
• Can I get a better rate and/or loan terms?
• Do I have good or bad credit?
• How fast do I need the cash?
• How much hassle am I willing to endure?

If you’re a homeowner with plenty of equity but a high rate on the first mortgage, a cash-out refinance could be a great option. You might be able to finance your home renovation and lower your rate.

However, if you have very little equity or your mortgage is underwater, you may have no choice but to get a personal loan or line of credit.

Alternatively, you could apply for a no-equity-needed FHA Title 1 loan — or the FHA 203K loan if you’re buying or refinancing a fixer-upper. Keep in mind, though, that the Title 1 loan is capped at just $25,000 for single-family homes. And the 203k requires lots of paperwork and processing time.

If you have sufficient equity, and you’re happy with your current mortgage rate, it’s probably best to apply for a home equity loan or a HELOC. No use in messing with your current mortgage rate if it’s already very low. Just add a HELOC on top of it instead.

Already buying or refinancing, but want to tack on the money needed for renovations. Choose the FHA 203k or Fannie Mae Homestyle loans. Or, if you’re a veteran looking to make your house more energy efficient, look into the VA Energy Efficient mortgage.

If you have bad credit, you still have options, but not as many options as those with good credit. A government-backed refinance may be your best bet. Otherwise, you’ll have to hope that you qualify for a personal loan with a reasonable rate (or can pay the loan back quickly).

The lower your credit score (assuming little or no home equity), the higher the odds that you’ll have to make trade-offs when it comes to home improvement financing. For example, you might need to accept a smaller loan in exchange for a lower rate, or put up collateral (such as a car) to obtain a larger loan at a reasonable rate.

The best way to finance home improvements

When it comes to any loan, the number one rule is always shop around!

Although it’s not a bad idea to start with a quote from the bank that issued your first mortgage, don’t stop there. Research current interest rates and terms, as well as closing costs and the other fees associated with different loans.

Don’t limit your research to interest rates. Otherwise, you might end up comparing apples to oranges.

Just because a lender has the lowest rate on (say) a cash-out refinance doesn’t mean it is offering the least-expensive option. It’s not uncommon for lenders offering low rates to tack on higher closing costs and other fees than the competition. In you’re not careful, you could pay more for a loan with the “lowest” rate.

Depending on the type of loan for which you’re applying, you should also:

• Make sure the loan doesn’t include a balloon payment — a lump sum that is due before the loan is paid off.
• Check the terms of the draw and repayment periods (for HELOCs). How much time do you have to withdraw money before the loan becomes fully amortizing? By how much will monthly payments increase once the draw period ends?
• Check rate variability. If the Federal Reserve hikes interest rates by x percentage points, how would that impact your ability to make the monthly payments? A 0.25% Fed rate hike raises your interest-only payment by $5 per month per $25,000 borrowed. Is there an option to convert the loan to a fixed rate?
• Be sure to borrow enough. Home improvement projects, especially big ones, are notorious for cost overruns. Therefore, you may want borrow more than you think you need to give yourself some “wiggle room.” Few things are worse than having to stop work midway through a home renovation project because the money dried up.
• Check your credit score before applying for a loan. Lenders always charge higher rates to people with lower credit scores.

If you’d rather spend eternity on a hamster wheel than do the legwork needed to locate the right loan, consider an online service such as LendingTree.

Despite its name, LendingTree is not a lender. It’s a loan facilitator. After filling out an application on its site, the company uses a computer algorithm to match you with different lenders in its network. So instead of pounding the pavement and surfing the web to find a lender with the best offering, lenders contact you with their quotes.

It’s one of the fastest, most convenient ways to comparison shop.

Based on a sampling of customer reviews, however, it’s obvious that LendingTree is a service that people either love or hate.

While some customers praised the company’s customer service and the speed with which they received multiple offers, others complained that they were deluged with calls from lenders — calls that just wouldn’t stop.

Alternatively, you can shop for a home improvement loan on this website. We can put you in touch with a lender that offers any kind of cash-out loan or 203k loan. They may even have a source for personal loans and home equity loans and lines of credit.

Best and worst home improvement projects

Before you consider home renovation financing, consider your long-term goals for the home improvement project you have in mind.

Are you undertaking the work for yourself — e.g., because you’re a “master chef” who’s always needed a ginormous kitchen island? Or do you simply want to increase the home’s resale value when you put it on the market in six months?

You’ve probably heard that certain improvements can increase the resale value of a home.

True.

What you may not have heard is that you will almost never recapture 100% of the money you invest in a remodeling project. Spending $50,000 to install a backyard patio doesn’t mean that you’ll receive an extra $50,000 when you sell the house.

In fact, according to Remodeling’s 2017 Cost vs. Value Report, the only type of home improvement that returns more than the original investment is installing fiberglass insulation in the attic. The average return on investment (ROI) for this improvement is 107.7%.

Home improvement projects with the best average ROIs nationwide include: entry door (steel) replacement (90.7%); manufactured stone veneer (89.4%); minor kitchen remodeling (80.4%); garage door replacement (85%); and siding replacement (76.4%).

Some of the worst home improvement projects in terms of average ROI include a bathroom addition (53.9%); installing a backyard patio (54%); major and minor bathroom remodeling (59.1% and 64.8% respectively); and major kitchen remodeling (61.9%).

Based on these statistics, it seems that “less is more” when it comes to increasing your home’s value via home improvements.

So before you start tearing down walls, hoping to make a killing in the real estate market, do a little homework.

Many renovations do increase a property’s value. However, the vast majority of home improvements do not pay for themselves once the house is resold.

Apply for a home improvement loan

Ready to get started? Check out loan options, get quotes, and receive personalized rate quotes. In just minutes, you could be on your way to remodeling your home — finally.

The post Home Improvement Loans | Finance Your Remodel in 2024 first appeared on My Mortgage Insider.

Pros & cons of tapping home equity

Traditionally, seniors don’t tap into their home equity for retirement income.

“I believe many people in their 70s and 80s look at it as welfare,” says Mary Russell, broker/owner at Mortgage Results in Aptos, Calif. “They feel they won’t be able to leave anything for their kids, and their kids are against it, too, because it takes away from their inheritance. That’s not true.”

Russell has worked with many people during their retirement years to use the equity in their homes. It all comes down to the fact that if they have equity in their home, they can use it to live a better life, pay for remodeling or a grandchild’s college or do anything else they want.

According to a recent survey by Voya Financial, 85 percent of non-retirees said they want to own their own home in retirement. However, a quarter of retired respondents revealed they still had a mortgage, and over half of this group had a balance of $50,000 or more.

Best options for accessing home equity

Here are a few options that seniors can use to access home equity:

Cash-out refinance

A cash-out refinance is a new mortgage results in the borrower getting cash in hand at closing or paying off debt that was not used for the purchase of the home. Cash-out refinances can help improve cash flow by paying off other debts with higher interest rates or payments.

These refinances can also be good sources of funding for education for children or grandchildren. The money can be used for just about anything including home improvements, investments or medical bills.

Home equity line of credit (HELOC)

A HELOC works like this: a lender agrees to give up to a certain amount based on the homeowner’s equity over a fixed time. This allows the retiree revolving access to approved funds. Unlike credit card debt, HELOCs are secured by equity and present less risk to lenders, according to the Urban Institute study titled Seniors’ Access to Home Equity.

Charitable home remainder annuity

It’s another planning tool, Russell says. It lets you convert your real estate into lifetime income. It reduces your income taxes now and estate taxes when you die. You pay no capital gains tax when the asset is sold. Basically, you will your home to a charity in return for an annuity that lasts the homeowner’s lifetime or another set amount of time.

Sell the home

This can give seniors a chance to downsize, rent or buy into a retirement community or long-term care community.

Home-share

This growing trend helps retirees share their extra private spaces with the appropriate adult guests. Many states, cities and senior organizations have begun to help match seniors which helps bring in extra income, reduces the load of household chores and gives instant companionship.

For instance, the New York Foundation for Senior Citizens’ free Home Sharing Program helps link these home sharers. One of the home-sharers must be age 60 or older. Professional social work staff comprehensively screen and check the references of all host and guest applicants.

Russell says that each retiree who is looking to increase their income should talk with their financial professionals and family members to talk about options and what would be best for their situation – financially and emotionally.

Reverse mortgage

Also called Home Equity Conversion Mortgages or HECMs, are government-insured loans allowing those 62 and older to extract from their home equity. There are many types of reverse mortgages; ones that pay off our existing mortgage and give you extra cash; others that give out monthly payments; and others that give a lump sum.

Russell works with many who use reverse mortgages to change their lives. She believes many people are confused and turned off of reverse mortgages because of past bad media. The Department of Housing and Urban Development and the Federal Housing Administration (FHA), which are responsible for many of the reverse mortgages, released new rules and regulations, she adds.

“In the past, people felt that the bank owns their house, and they will take it away from them,” she says. “And in the past, they used to. If one of the spouses died, the other was kicked out. That can’t happen anymore with reverse mortgages.”

According to the National Reverse Mortgage Lenders Association, today’s reverse mortgages are determined by a formula based on the home’s appraised value, the youngest borrower’s age and current interest rates. And counseling is required for all HECMs.

Reverse mortgages can help seniors get money for their grandchildren’s education, they can travel the world, they can repair their home, or they can get home healthcare. There are so many options when using a reverse mortgage, Russell adds.

One client who used a reverse mortgage was the mother of one of Russell’s friends, who was 94. She wanted to stay in her home but nursing expenses to keep her there had risen to $14,000 a month. She owns a $1.5 million home in California without any payments left on it. A reverse mortgage gave her $14,000 a month so she can stay in her home and have the nursing taken care of.

“Now, her daughters don’t have to bring mom into their homes, and everybody wins. That one did my heart good,” Russell says.

The bottom line

Seniors who wish to tap their home equity in order to supplement their retirement income have a number of options available to them. A lender can help you determine which one is best for your unique financial situation.

The post 6 Ways Seniors Can Tap Home Equity To Supplement Income first appeared on My Mortgage Insider.

Here we explore how much it costs to renovate a house in 2024, ways to fund your home renovations, tips on how to save money, and frequently asked questions.

Check your cash-out refinance interest rates. Start here (Sep 16th, 2024)

How much does it cost to renovate a house?

Home renovation costs are rising. Together, Americans spent an estimated $567 billion on home upgrades and repairs in 2022, a 15% jump from 2021, according to the Joint Center for Housing Studies of Harvard University’s Improving America’s Housing 2023 report.

At the time of writing, renovating a 1,250- to 1,600-square-foot home costs an average of $49,963, according to 2023 data compiled by Angi.com, a home improvement resource. But renovation project costs can vary widely depending on the size, age, and condition of your home, the scope of the work, and the materials used.

Cost estimates to completely renovate a house

Remodeling a whole house costs an average of $10 to $60 per square foot, according to a nationwide survey of home contractors by HomeAdvisor. At the time of writing, completely remodeling a 2,500-square-foot home could cost anywhere from $25,000 to $150,000, with a high-end custom remodel potentially exceeding that spend.

Homeowners looking to do a gut renovation, or make significant structural changes, can expect to pay more.

Homeowners can expect to pay a general contractor, as well as — depending on the project — electricians, plumbers, and interior designers. In addition to labor costs, materials, and new appliances will factor into the total cost of a house remodel.

Check your cash-out refinance interest rates. Start here (Sep 16th, 2024)

Home renovation cost by type

Let’s look at the average cost for specific types of home renovations at the time of writing, based on HomeAdvisor data:

Add a room

Building a new room, like an additional bedroom or a living room, typically costs $80 to $200 per square foot, including materials and labor.

Renovate a bathroom

The average bathroom remodel costs $125 per square foot. A primary bathroom renovation can run up to $28,000.

Renovate a kitchen

A full kitchen remodel costs on average $26,800, or approximately $150 per square foot, with typical costs running between $14,612 and $41,325. An upscale kitchen remodel, using the most high-end materials, can exceed $130,000. The average gut job, which entails a new layout, costs $30,000 to $80,000.

A kitchen renovation could include new light fixtures, new flooring, upgraded faucets, new cabinetry, or new countertops.

Remodel a garage

Remodeling a garage costs an estimated $6,000 to $22,000 on average. Building a garage from scratch runs an average of $28,351, or between $16,418 and $40,285.

Exterior remodel

Exterior updates cost between $5,000 to $15,000 on average, depending on the type of work and the size of the house. More specifically, painting the exterior of a 1,500-square-foot house costs an average of $1,810 to $4,466 — and painting a two-story home could cost as much as 50% more than to paint than a one-story home.

Financing a home renovation project

Cash from savings is the most common source of home improvement funding, accounting for nearly four out of five projects, the Harvard University study found. But if you’re not sitting on a ton of savings, there are several ways to finance a home renovation: a home equity loan, a home equity line of credit, or a cash-out refinance.

• Home equity loan. Also known as a second mortgage, a home equity loan allows you to access the equity you’ve built in your home by using your home as collateral. Home equity loan rates can vary depending on how much equity you’ve accumulated, your credit score, and your debt-to-income ratio. Typically, you can borrow up to 80% of your home’s appraised value, minus what you owe.
• Home equity line of credit. A home equity line of credit, or “HELOC,” allows you to open a line of credit against your house, providing access to cash of up to 80% to 90% of your property’s appraised value. Unlike home equity loans, HELOCs have variable interest rates.
• Cash-out refinance. A cash-out refinance allows you to refinance your current mortgage for more than what you currently owe and pocket the difference in cash. Generally, you can borrow up to 80% of your home’s appraised value.

Check your cash-out refinance interest rates. Start here (Sep 16th, 2024)

Common home renovation costs

These are the most common types of home renovation expenses, at the time of writing:

• Labor. Labor is often the largest home renovation cost. Typically, consumers spend about $20 to $150 per hour for labor, according to Angi.com.
• Materials. An estimated 82.5% of construction materials saw a significant cost increase in 2022, according to construction cost data tracking firm Gordian. Steel prices rose at the fastest rate (up 22%), followed by wood (16%), concrete and masonry (15%), electrical conduit (12%), and insulation (11%).
• Permits. Nationally, a building permit costs $1,602 on average, HomeAdvisor says, but costs can vary depending on where you live and the type of project you’re doing. Contact your local building permits agency for prices.
• Taxes. Don’t forget to factor in taxes when crafting your budget. (Pro tip: Certain home renovations, such as solar panels and home office improvements, may qualify for a tax deduction.)
• Unforeseen costs. A good rule of thumb is to set aside an additional 10% to 15% to accommodate for surprise expenses, such as mold lurking behind drywall in an older home.
• Type of house. Whether you live in a single-family house, a townhome, a condominium, or a co-op can impact your home renovation costs.

Additional home renovation costs

These extra expenses can add a significant amount to your home renovation costs:

• Temporary living arrangements. If you’ll need to stay at a hotel or a rental while the work is being done, make sure to budget for your living arrangements.
• Floor plan changes. If you’re looking to change your home’s floor plan, you’ll need to hire an architect. Most residential architects charge between $70 and $250 an hour depending on their level of experience and area of expertise, HomeAdvisor says.
• Foundation repairs. Repairing foundation problems typically costs from $2,171 on the low end up to $7,811, according to HomeAdvisor. Repairing small issues, such as minor cracks, can cost as little as $500; major repairs, on the other hand, can cost $10,000 or more.
• Mold or asbestos remediations. Professional mold remediation typically costs between $1,300 and $3,150, HomeAdvisor reports, depending on the type of mold, how big the mold problem is, and where the mold is located. Asbestos removal costs $1,191 to $3,236 on average, depending on the size of the area, labor, materials, and other factors, HomeAdvisor found.

How to estimate home remodel costs

Determining how much a home renovation is going to cost can be a challenge, since costs can vary widely depending on where you live, the age and condition of your home, the materials you select, and other factors. But to get a ballpark estimate, you can refer to HomeAdvisor’s True Cost Guide and Remodeling Magazine’s Cost vs. Value Report. Both guides let you see average costs both nationwide and in your zip code.

Check your cash-out refinance interest rates. Start here (Sep 16th, 2024)

Tips to save on home renovation costs

Looking for ways to curb your home renovation expenses? Consider these cost-cutting strategies:

• Choose lower-cost finishes. Selecting less-expensive materials can help you save money. Case in point: Ceramic tile for a bathroom remodel costs about $1 to $15 per square foot, whereas marble costs about $15 to $190 per square foot, Angi.com says.
• Hit the recycling center. Nationwide, Habitat for Humanity operates more than 1,000 ReStores, which sell used materials at lower prices.
• Shop around for contractors. Get multiple quotes before hiring a contractor for the job.
  Do some work yourself. A little DIY can go a long way. Consider tackling prep work, such as cleaning and sanding surfaces, prior to bringing in a professional to complete the job.
• Find deals on appliances. Independent retailers and appliance outlets often offer lower prices than major home improvement stores.

How much does it cost to renovate a house FAQ

What’s the difference between a house rehab, renovation, and remodel?

Many people use the terms house rehab, remodel, and renovation interchangeably, but they differ slightly. Generally, a home rehab entails making home improvements while preserving the historical and character-defining features of the home. Renovation is when you improve the condition of a home by repairing, altering, or adding features. And remodeling is a complete makeover of a room or house.

Is $100,000 enough to renovate a house?

A six-figure budget can go a long way when renovating a house, but it may not be sufficient, depending on the scope of the work, the condition of your home, labor rates in your area, and what building materials you choose. For example, building a home addition can surpass $100,000 depending on the type of room being added, the square footage of the addition, and the materials, according to HomeAdvisor.

Is it cheaper to renovate a house or build from scratch?

In most cases, it’s more affordable to renovate than to tear down a home and build a new home from scratch, since renovating allows you to avoid costly demolition expenses.

What is the most expensive room to renovate in a house?

Generally, a kitchen renovation is the most expensive, with a mid-scale kitchen remodel running anywhere from $30,000 to $65,000, HomeAdvisor reports.

Is a full house renovation worth it?

This depends on your goal. A full house renovation might make sense if you’re looking to flip a property and turn a profit, but it may not be a good idea if you’re on a shoestring budget or planning to take on high-interest credit card debt to foot your renovation expenses.

Which remodeling projects have the highest ROI?

Not all remodeling projects are equal with respect to return on investment. New kitchens and bathrooms typically deliver the best ROI. Some of the worst remodeling projects for a home’s resale value include backyard patios, sunrooms, home office additions, and in-ground swimming pools — although ROI for specific projects can vary depending on where you live. (Adding an in-ground pool in steamy Phoenix, Arizona, would yield a better return than adding an in-ground pool in chilly Minneapolis, Minnesota).

Bottom line: When is a home renovation worth it?

Certain home renovations are worth it, at least from a return-on-investment perspective, while others aren’t.

It can be a good way to improve your home value but take a close look at your renovation budget before you begin a renovation to make sure you have enough funds to get the job done. No one wants to live in — or purchase — a home that looks like a construction site.

Check your cash-out refinance interest rates. Start here (Sep 16th, 2024)

The post How Much Does It Cost to Renovate a House? first appeared on My Mortgage Insider.

But what if you don’t want to sell your current home after moving out? What if, instead, you could turn your home into an investment property that produces rental income?

Here are the steps to make that a reality.

Want to rent out your current home? Check your eligibility here (Sep 16th, 2024)

Renting out the home you bought as your primary residence

Before putting a “For Rent” sign in the yard, make sure you’re following your mortgage company’s rules.

Whether using a conventional loan or a government-backed FHA, USDA or VA loan, home buyers get a better deal when buying a primary residence. Borrowers can make lower down payments and lock in lower interest rates when they plan to live in the home.

Plus, government-backed loans — such as USDA, VA and FHA loans — work only if you’re buying a primary home.

They won’t finance a second home or investment property.

As a result, using a primary residence loan and then immediately placing renters in the new home can constitute fraud. Mortgage fraud is a serious matter and one from which you’ll want to stay far away.

It’s best to be upfront with your lender and ask about any rules and requirements that will apply if you want to rent out your existing home.

How soon can you rent a house after buying it?

If you financed the home as your primary home, you’ll need to live there for 12 months before turning it into an investment property.

But your lender may make an exception to its occupancy requirements and allow you to rent out your home sooner.

For example, what if you have an unexpected new family member and your current home just doesn’t suit your needs? Or, what if you have a job transfer opportunity that wasn’t on the table when you bought your home? What if you’re on active duty in the military and get deployed?

You may legitimately need to rent your home instead of selling it.

Fortunately, there are a number of instances where it is completely acceptable to rent out the home you recently bought as your primary residence. And you shouldn’t need to refinance out of your primary residence loan to make it work.

Check today’s mortgage rates (Sep 16th, 2024)

Tips for going from homeowner to landlord

If you need to move but don’t want to sell your home, becoming a landlord may seem like a no-brainer — especially with the cost of rent rising across the country.

Being a landlord isn’t always easy, though. Homeowners who are thinking about welcoming renters into their homes should first:

Check with the HOA

This is an important first step if your home is a condo, townhome, or any other property that belongs to a homeowners association (HOA). Your home loan servicer may be OK with you renting the home, but your homeowners association may not be.

Some HOAs require owner occupancy. Others allow a percentage of the neighborhood’s homes to be rented. Others allow renters but set rules about the terms of the lease.

If your home is not governed by an HOA, you can skip this step.

Research landlord-tenant laws

Each state and city is different when it comes to landlord-tenant laws. Make sure you understand your obligations as a landlord with regard to security deposits, tenant screening, and lease agreements.

It may help to talk to another real estate investor in your area for guidance. Property management companies are usually experts in landlord-tenant laws, too.

Get the right home insurance coverage

Homeowner insurance policies for owner-occupied homes won’t always provide enough insurance coverage when you’re renting out the home.

Before a tenant moves in, tell your insurance agent or company about the change in property status. You may have to pay more in premiums, but that’s a lot better than discovering your policy won’t pay for expensive repairs because your home wasn’t properly covered.

Encourage your renters to get their own renters insurance policy to cover their personal belongings.

Have enough cash flow for maintenance

It’s a good idea to set aside some of the rent you’re earning to maintain the home. But if the home needs a repair before you’ve built up enough cash from rent payments, you’ll still need to make the repair.

So be sure to have some money set aside for repairs even before the renters move in.

Be prepared for the work

Being a landlord isn’t just about sitting back and collecting rent payments. Landlords can play the role of a real estate agent, a negotiator, a repairman and, at times, an evictor.

If you’re not interested in taking on so much responsibility, look for a property management company in your area.

Check today’s mortgage rates (Sep 16th, 2024)

Tax implications of renting out your primary residence

Being a landlord could complicate your income taxes, both with the IRS and your state’s revenue department. The rent you earn becomes taxable income, and since there is no employer withholding taxes from this income, your annual tax bill could be significant.

To limit your tax liability, you can claim tax deductions such as property taxes, insurance premiums, HOA dues, mortgage interest, the cost of repairs and depreciation. This requires good record keeping throughout the year.

Keeping good records could also affect the capital gains tax you’d owe when you sell the rental home.

Always consult with your accountant to get your tax return right. The accountant’s fees can pay for themselves when the accountant knows about tax benefits you didn’t know about.

Want to rent out your current home? Check your eligibility here (Sep 16th, 2024)

Renting out a primary residence FAQs

Can I rent out my primary residence?

Yes. But check with your mortgage loan servicer first, especially if you bought the house within the past year. Also, check with your HOA which may have owner-occupancy requirements.

Can I rent out part of my primary residence?

Yes. You’d still need to follow landlord-tenant laws. One mortgage loan program, Fannie Mae’s HomeReady, lets you use this kind of rental income to qualify for a new mortgage, which means you could qualify for a loan for a higher purchase price.

How long can I rent out my primary residence?

You can rent out your primary residence by the month or for an extended lease. Many homeowners prefer a six- or 12-month lease which helps ensure ongoing rental income while still allowing for flexibility after the lease expires.

Can I rent out a room in my primary residence?

Yes. This can be a good way to help make mortgage payments. But you’re still a landlord and should follow landlord-tenant laws to protect yourself and your tenant.

Can you rent out your main residence?

Yes, but be sure to check with your mortgage company first, especially if you bought the house as a primary residence within the past year. Becoming a landlord has tax implications, so check with a tax accountant, too.

Can I rent out my house without telling my mortgage lender?

For many homeowners, living in the home for at least a year fulfills the loan’s occupancy requirements. If you’re not sure about your lender’s rules, be sure to check before converting your primary residence into a rental or Airbnb. Even if you know you’re in the clear, it never hurts to let your lender know about your new plans. Informing your lender can keep your escrow contributions on track since your property taxes and insurance premiums will likely increase.

What happens if I don’t tell my lender I’m renting out my home?

Since it tracks insurance and tax data, there’s a good chance your lender will find out you’re renting your primary residence. The lender could file fraud charges against you for misrepresenting your intention to live in the single-family home you financed.

How do I change my primary residence to a rental property?

You’ll need to move out, remove any personal belongings that won’t be part of the rental, and offer the home for rent. But first, check with your home loan servicer, read up on landlord-tenant laws, and consider the tax implications of becoming a landlord. If you don’t have time for all this extra work, you may need to work with a property management company.

How soon after buying a house can you rent it out?

In most cases, you’ll need to wait a year before renting out your home — if you bought the home as a primary residence. If you used an investment property loan to buy the home, you can rent out the home right away.

The bottom line

With home costs — and rents — rising in many markets, you might not want to sell your home even if it no longer suits your needs.

Most homeowners can become real estate investors by renting out their primary residences.

Just be sure you know what you’re getting into before advertising your home for rent.

Want to rent out your current home? Check your eligibility here (Sep 16th, 2024)

The post Can I Rent Out My Primary Residence? first appeared on My Mortgage Insider.

Every area of the country is different,which can mean different protocols and rules to follow. Hopefully, your real estate agent can help you with a list of to do’s after your closing for that particular area. But no matter where you live, here are a few important things to do after you get possession of your house.

Check your home buying eligibility. Start here (Sep 16th, 2024)

Hire a pest control company

“If you are in an area such as southwest Florida and other warm climates, we have lots of ants, cockroaches and other bugs. The northern states have issues with mice,” says Terry Records, broker/owner of Records Results Real Estate in Cape Coral, Fla. “If you don’t spray your yard now, these bugs will visit you inside your house.”

Change your driver’s license

“I got in trouble with this one. I waited too long when I moved and got a ticket,” Records says.

Every state is different, but some states require a change of address on your license within 10 days of moving. If you are new to a state, you may have to take a written exam and possibly even a driving test.

Secure closing papers & other documents

If you haven’t done so already, get a safe deposit box at your bank or purchase a fireproof safe. Put all your closing papers inside it, along with your passport, birth certificate, Social Security card, and other official papers for safekeeping.

Check with your auto insurance

Insurance companies are picky about where you live, and prices do change from place to place. Records has moved to many states through the years including North Dakota, Minnesota, California and Florida. She was caught off-guard when Florida required that her car insurance be from a Florida company.

Check your mortgage rates. Start here (Sep 16th, 2024)

Contact government officials about homesteading

You can get a reduction in your assessed value by thousands of dollars – which gives you a discount on your property taxes – by just filling out a form saying you occupy the home you just bought. Some counties give other homestead exemptions like for senior citizens or returning veterans. “This doesn’t happen automatically,” Records says. “You have to tell them you live there. It all depends on your city or your county of what type of homestead credit is available.”

Clean the gutter

Who knows how long it’s been since the previous owners did this dirty chore. But if leaves and other gunk are blocking the flow of rain, you could have problems such as water leaking into the house if you don’t keep them free flowing.

Meet your neighbors & others in the community

This can be hard for some, but you really should get to know your neighbors by introducing yourself. Records says she has moved many times in her lifetime and has found that joining groups on Meetup.com helps you connect with other new residents in your area who have the same interests.

Check your home buying eligibility. Start here (Sep 16th, 2024)

Hire a fireplace expert

Whether it’s a wood-burning or gas fireplace, get a professional to check it out. With thumbs up from the expert, you can then enjoy cozy nights near the warmth of the fire.

Change furnace filters

It’s best if you make sure to replace the furnace and air conditioner filters every three months. There are lots of options out there when choosing air filters for different seasons. Choosing the right filter can not only save money by letting your furnace and air conditioner work more efficiently, but it also improves air quality, removes odors, and even prevents the growth of antimicrobial particulates.

Find the main water shutoff

You never know when you will need to shut off the water because of a broken water pipe. So, find the shutoff and test it to see if it works.

Change every lock

You never know who the former owners gave a house key to. A locksmith can rekey your locks if they are expensive ones, and some stores can also rekey certain brand-named locks, which can be done quite inexpensively.

You can also choose to get four-digit keyless locks. That can be a great option, especially with kids who lose their keys all the time anyways. Also, don’t forget to reset a garage door keypad from the outside of your garage. There are great instructions online on how to do it, or call a garage door company for assistance.

Cover the windows

The former owners might have taken all the curtains and blinds with them. So before your neighbors get to know you real well because they can see through your windows, purchase coverings to give yourself some privacy.

Then it’s time to relax and enjoy the home of your dreams.

Check your mortgage rates. Start here (Sep 16th, 2024)

The post 12 Things To Do After Closing On A House | Next Steps 2024 first appeared on My Mortgage Insider.

But is paying off your auto loan with a cash-out mortgage a smart money move? As with most personal finance matters, the answer is: it depends.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

What to consider

If the decision were based solely on comparing the average interest rates for car loans with those of new mortgages, the answer (for most people) would be no.

But there’s more to good money management than interest rate comparisons.

Factors that should be considered include current and future cash-flow needs, the amortization schedules and tax deductibility of your loans, asset depreciation and your credit score.

In some cases, it might be wise to consolidate your consumer debt (including auto loans) with a cash-out refinance, even if you’re unable to lower the interest rate.

Click here for today's refinance rates (Sep 16th, 2024)

Auto loan Rates vs mortgage rates

A cash-out refinance involves taking out a new mortgage for more than your outstanding balance. You then pocket the difference between the new and old loans.

If you recently took out an auto loan, it’s likely that the interest rate is identical, or even slightly lower, than the rate for a cash-out mortgage.

In 2016, the average rate for new vehicles was in the low four percent range, and for used cars, the high four percent range.

At the moment, the average rate for a conventional 15-year fixed mortgage is just about four percent, and it’s around 4.5 percent for a 30-year fixed mortgage.

Even if auto loan rates climb to 4.5 percent (new cars) and 5.2 percent (used) this year, which some experts are predicting, it’s unlikely you’ll save money by paying off a car loan with a cash-out refi, especially when you factor in the closing costs associated with new mortgages.

For cash-out mortgages, closing costs typically range from three to six percent of the loan.

Keep in mind, too, that while most houses rise in value, the value of automobiles always depreciates – usually quite fast.

So if you obtain a new 15- or 30-year mortgage to eliminate the car loan, you’re financing a depreciating asset by taking out equity from an appreciating asset.

Click here for today's mortgage rates (Sep 16th, 2024)

When paying off a car loan with a cash-out refi makes sense

If your car loan is relatively new, chances are that most of the monthly payments made in the first year or two are going to go toward interest, and not toward the principal.

In that case, getting a cash-out refi to pay off the loan could save you hundreds of dollars in interest charges, assuming there’s no prepayment penalty.

Another argument in favor of getting a cash-out refinance is that, unlike car loans (and almost every other form of consumer debt), mortgages are tax deductible.

By reducing your taxable income and landing a bigger tax refund, you could potentially save thousands of dollars a year.

To determine whether you’ll come out ahead by using a cash-out mortgage to eliminate your auto loan(s), contact your current lender to obtain an amortization schedule, or go online and look for an amortization calculator.

With this tool, you can figure any financial benefits you’ll receive by eliminating the auto loan with a cash-out refinance.

If math and money management isn’t one of your personal strengths, consult with a financial planner or an accountant instead.

Paying off credit cards is a “no-brainer”

Deciding what to do about an auto loan can involve numerous calculations and some close judgment calls, but that’s rarely the case when it comes to using cash-out refinances to consolidate other types of consumer debt, especially credit card debt.

Swapping credit card debt for a new mortgage is often a “no-brainer.”

The average credit card today carries an interest rate ranging from 10-20%, plus cash-advance fees and “penalty rates” for late-payers or people with lower credit. By consolidating this debt with cash from a new mortgage, you can reduce your interest rate to just four or five percent.

In addition, you’ll enjoy more cash-flow flexibility. With consumer debt, there could be frequent changes to interest rates, minimum payments, and terms, making it difficult to know exactly how much you’ll owe from month to month.

By contrast, a fixed-rate mortgage bundles everything into a predictable monthly payment.

Paying off credit cards with a cash-out refinance can also improve your credit score by reducing your credit utilization ratio (the amount of available credit you’re using).

The danger with debt consolidation, of course, is when someone refinances their mortgage to eliminate consumer debts, and then turns around and racks up new debts.

If you do this, and then you need or want to buy a new home, you could end up with no equity in your existing house, or possibly something worse.

If deficit financing has become a way of life, debt consolidation with a cash-out mortgage is not the solution.

Before you apply for a cash-out mortgage, make sure you’ll receive at least one of the following three benefits: a shorter loan term, lower monthly payments, and lower costs over the term of the loan.

Click here for today's mortgage rates (Sep 16th, 2024)

The post Should You Pay Off a Car Loan With a Cash-Out Mortgage? first appeared on My Mortgage Insider.

After that, the next question a home buyer will typically ask themselves is: “How much will I need to put down?”.

Many people still think a 20 percent down payment is required in order to purchase a home. However, it’s possible to buy a home while putting down less thanks to private mortgage insurance.

Check your home buying eligibility. Start here (Sep 16th, 2024)

What exactly is private mortgage insurance (PMI)?

Although many homeowners may beg to differ, private mortgage insurance (PMI) isn’t such a bad thing.

Because of PMI, down payments of less than 20 percent make home buying a reality for people that wouldn’t otherwise have the opportunity to become homeowners.

There are varying types of mortgage insurance required depending on the mortgage program used.

Private mortgage insurance is a mandatory insurance policy for conventional loans. It is required by the lender and paid for by the homeowner to insure the lender should the homeowner default on their mortgage payments.

PMI is required on conventional loans when the homeowner is making a down payment of less than 20 percent. You will also need PMI on conventional refinance loans if you have less than twenty percent equity in your home.

When and how can I remove PMI from my loan?

Fortunately for homeowners with conventional loans, private mortgage insurance won’t be part of your mortgage payment forever.

The Homeowners Protection Act requires that lenders send homeowners annual notices that remind you that you have the right to request the cancellation of your PMI.

As a homeowner, you can request that the mortgage insurance be removed when you have reached the date when the principal balance of your mortgage falls to 80 percent of the original value of your home.

Even if you do not request it be removed, lenders are required to cancel PMI automatically on conventional loans once you’ve reached the date when your principal balance reaches 78 percent of the original value of your home.

You should be able to locate these dates on your closing paperwork. More specifically, you should have a PMI disclosure form that you signed when you closed on your home loan.

You can request that your PMI be dropped earlier than these dates if you meet the following criteria:

• You must be up-to-date on your monthly payments.
• Your request must be in writing.
• You may need to certify that you do not have any 2nd mortgages on your home.
• It may be necessary that you provide an appraisal to support the value of your home.

Generally, assuming you meet these requirements, your lender must cancel your PMI.

It is important to note that some lenders have a minimum requirement. That means you will have to wait at least two years before being able to get rid of your mortgage insurance.

Click here for today's mortgage rates (Sep 16th, 2024)

Refinancing to get out of paying PMI

It is estimated that there are more than six million homeowners in the U.S. that are eligible to refinance their mortgages. With home values rising and mortgage rates holding at low levels, refinancing is a smart option for many homeowners.

Refinancing your existing mortgage can be beneficial for a variety of reasons. For example, homeowners may be interested in refinancing to get a lower interest rate, to shorten their term, or to remove their mortgage insurance.

Let’s say you purchased your home four years ago for $200,000, and financed $180,000 at 3.875%.

Due to putting down 10 percent, this means you had a loan-to-value ratio of 90 percent and you are paying mortgage insurance.

Four years later, after making all your payments on time, you now owe approximately $166,000.

Now let’s assume your home has appreciated at a rate of five percent per year. This means your home is now valued at roughly $240,000.

• $166,000 divided by $240,000 equals a loan-to-value of 69 percent.

This is well below the 80 percent mark and means you may be able to refinance into a new loan to remove your PMI.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

Getting rid of PMI

If you put less than 20 percent down when you purchased your home, or if you refinanced with less than 20 percent equity, you are required to pay mortgage insurance.

Fortunately, you can remove it after you have met a few conditions.

Mortgage insurance can be expensive, especially if paid over many years. However, for many people, PMI is a good thing. Without it, homeownership wouldn’t be possible.  

Ready to buy a home? Start here (Sep 16th, 2024)

The post How Do I Remove PMI On My Conventional Loan? first appeared on My Mortgage Insider.

Potential buyers are curious and will check in every drawer, closet and cupboard. But by removing temptations and taking steps beforehand, it could deter stop people from finding your valuables.

“Even when a realtor is showing the house, they aren’t with them 100 percent of the time,” says Joe Peffer, broker-owner of Delicious Real Estate in Columbus, Ohio.

And he’s not talking just about stealing an expensive watch or swooping up some crystal goblet. They also can take your identity and bank information, among other things.

“I call it low-hanging fruit, like a checkbook or credit card. People leave stuff out like that, and it’s so tempting,” he adds. “Usually when you are showing a house to someone, they are serious buyers,” Peffer says. “But theft does happen.”

Here are some things you might want to think about hiding until after the showing or open house is over:

Check your home buying eligibility. Start here (Sep 16th, 2024)

Wi-Fi password

Many people have their Wi-Fi password written on top of their router, modem or computer. A person can memorize it, go outside to log in to your Wi-Fi and start finding all your accounts. “People can do so much damage in such a short time,” he says.

Passwords to your bank account, etc.

“A lot of times, especially with baby boomers, they have a list of all their passwords next to their computers,” Peffer says. “It’s a good idea to put it away in a safe place when showing your house. “People also have their bills, credit card statements and other personal mail just sitting there. Identity theft is a real problem.”

Also, store away your family calendar. No one needs to know when you’ll be gone for a week on a cruise.

Gadgets

It’s easy for people to hide a laptop or tablet in their coat or purse. You need to put them in non-obvious places, lock them away in a desk drawer or closet, or put them in a locked trunk.

Jewels

Some people think they are being smart by putting them in a locked box, but that locked box should be hidden because it also can be taken easily.

Real estate agents aren’t everywhere in the home during an open house, so they can’t keep an eye out for everything that might be taken.

Wine

It’s pretty easy to snatch a wine bottle from the wine fridge or rack and put in a tote bag. So, just keep out a few of your least expensive bottles for staging and store the rest.

Heirlooms and priceless objects

Don’t use your finest heirlooms and treasures for staging. Also, if photos of your home are displayed on any of the MLS listings or house websites such as Zillow, make sure expensive valuables are not displayed.

Medicine cabinets

There are prescription drug abusers that come to open houses to seek out their next fix. In fact, a few years ago in San Diego, public service ads ran to raise awareness of this issue. So, clean out your meds and hide them or keep them with you.

Remote controls and keys

That extra car fob and garage door opener hanging by the back door are just an invitation for a thief to grab and come back some other time to steal your car, or have access to come into the house to take whatever they want.

Peffer says the best way to prevent theft during an open house is to not have an open house at all. The most recent statistics from the National Association of REALTORS® shows that only 2 percent of homes were sold because of an open house.

But if you do schedule an open house during your for-sale-by-owner house or with your realtor, do some things that might safeguard your possessions.

Have a sign-in sheet for everyone coming into the house. Keep your home security going during any showings, even if you have already moved out of the house.

If the home has several floors, ask agent to bring along helpers so all floors are covered. You can also ask friends to staff your house to walk around watching for anything suspicious.

Lastly, don’t put stuff in your top dresser drawers. That’s the first place thieves look for valuables.

“As a realtor, you always want a crowded open house for more potential buyers, but that can also be a little bit scary,” Peffer says. “You can’t be everywhere. Some realtors just hang out in the kitchen. But I like the idea of circulating around the whole house. Your agent needs to be out and about, so that everyone knows he/she could pop into any room at any time.”

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The post How to Protect Your Home When Showing It to Potential Buyers first appeared on My Mortgage Insider.

The reality is that you can fight city hall or your county which puts the tax bill together. There are a few ways to get that bill lowered – and potentially save hundreds to thousands each year.

“It’s a big myth that you can’t get your tax bill lowered,” Pete Sepp, president of the National Taxpayers Union & NTU Foundation in Washington, D.C. “And that myth is exacerbated by so many people who just make a big monthly payment to their mortgage company that includes their property taxes.”

Sapp said most people never pay attention to what they really are paying in local property taxes. They first open up the tax bill, then realize that the mortgage company pays their tax bill – which, of course, they have been paying monthly with their mortgage payment, he adds.  

“People never really question the assumptions that went into that bill in the first place that are reflected in their mortgage payments,” Sepp says.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

Errors in property taxes can be common

It is estimated that up to 60 percent of properties are overcharged on tax bills. Many times, it starts with the original information given to the city or county about the property.

Homes are usually assessed either by a system that compares your property to other local properties or by a replacement cost system.

With the comparable sales system, the assessors may see that homes in the same area sold for $120,000, so your home is assessed at that value.

But the assessors don’t take into account any specifics that could increase or decrease the value of your property.

“This is an example of inaccuracies or an oversimplification,” Sepp says. “This is something you will be able to challenge by reviewing your property card.”

Sometimes, the information is available online. Other times, you will have to go to your local assessor’s office to get the information. It is public information, plus it is your property.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

Tips to lower your property taxes

1. Study your property tax card

This shows the size of the lot, room sizes, fixtures in the house, and other information about improvements or special features. Mistakes happen, and the assessor can make the corrections and possibly do a re-evaluation.

This can go in your favor and potentially lower your taxes.

2. Check comparables to lower taxes

Information about other home assessments in the area are also available to the public – sometimes for a charge.

Sepp says there can be big discrepancies from one house to another. Just because someone has the same 3 bedroom home as you, they might also have a three-car garage and a swimming pool. Yet, you are paying the same tax bill without those luxuries.

3. Make an informal tax appeal

If you find that your assessment is unfair, talk with the assessor’s office about the information you have found. If the assessor doesn’t agree, then it’s time to file your formal appeal. You might want to actually attend an appeals board hearing before your case is heard.  

Just remember that every state (and jurisdiction) has different rules about real estate taxes. Plus, the rates are quite different.

New Jersey is the highest with 2.29 percent while the lowest is Hawaii with .28 percent. That means on the same $176,000 house, the taxes would be $4,026 in the Garden State, but only $489 in the Aloha State, according to Wallethub.com.

Some other ways to drop your tax bill is through exemptions that you might be qualified for. Here is a list of different qualifications to get a cut or even eliminate all of your real estate taxes:

• Seniors — There are many states that offer reductions in property taxes. For instance, the state of Washington reduces your taxes the year after you are 61, according to HouseLogic.com, a homeowners’ site published by the NATIONAL ASSOCIATION OF REALTORS®.  
• Renovations — Some states give you a property tax break for renovating. In Bismarck, N.D., you can earn a five-year exemption from paying property taxes on the value you added to your home with the remodeling if your home has to be 25 years or older.
• Veterans — Nationwide, states are lessening the financial burden on qualified disabled veterans and veterans or their widowed spouses when it comes to property taxes. Some states waive all the taxes for disabled veterans. Check with your local taxing authority on what benefits can come your way as a veteran.
• Renewable Energy Systems — Some states don’t include the value of your green improvements from your real estate assessment, such as geothermal heat pumps and solar panels. Look for what tax breaks you can get in your local jurisdiction on the Database of State Incentives for Renewables & Efficiency.
• Homestead — Homestead can mean a lot of things, such as getting a tax break for a if it is your primary residence, or getting a drop in your tax bill because of your income level. Check with your local assessment office on the type of homestead exemptions available.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

The post How To Lower Your Property Taxes first appeared on My Mortgage Insider.

There can be a lot of work involved in selling a home on your own, but if you’re willing to put in the effort it can happen.

Check your home buying eligibility. Start here (Sep 16th, 2024)

More sellers are selling on their own

“This is the biggest trend in real estate,” says Sissy Lappin, author of Simple and SOLD.  “Middlemen are disappearing all over the place, and there is no stopping the internet when it comes to changing an industry. Look at E*TRADE and Turbo Tax. Real estate is no different.”

She adds that anyone with a laptop can sell their own home.  Her company, ListingDoor.com, and other web-based companies are helping homeowners sell their houses without spending too much money or paying a realtor’s commission.

Juan Diaz, owner of Equity Track, a foreclosure investing company in Oakland, Calif., has bought and sold a lot of houses on his own through his flipping homes’ business.

“These properties sell through your networks. That is absolutely the most important thing to keep in mind when you’re putting up your property,” he says. “That is one of the reasons that realtors are so key. They have a lot of networks they can tap into. If you’re well-connected in the real estate world, you can substitute for what a realtor would do. But either way, it’s going to come down to your network for selling your house.”

When Diaz sells  a home on his own, he holds open houses, and puts up a bunch of signs around the neighborhood, on main streets and in the yard of the home being sold.

“I’ll also send off an email to all the realtors I know to let them know about the property. If you do those things, especially in a crazy market, word tends to get around,” he says.

Check your home buying eligibility. Start here (Sep 16th, 2024)

Success stories for people selling their own homes

Sold in 14 days

Within two weeks of putting a sign in her yard last year and using a listing service, Stephanie Pierre sold her house in Texas.

“I think I saved myself about $10,000 without using a realtor. These days you don’t need a realtor. They can’t do anything for you that you can’t do for yourself,” she says.

Her four-bedroom, modern-looking home with high ceilings in Plano got several offers. She accepted the third offer that came in.

To stage her home, she got a storage unit, cleaned out all the closes and storage spaces and put extra furniture in the home. Staging can help homeowners sell their home sooner and potentially for a higher price.

“My house always showed like a model. I am very creative and had large pieces of art and beautiful furniture. So that helped,” she adds.

About 50 people came through the house. If Pierre was ever going to sell a house again by herself, she would ask for more money and have someone else talk to the buyers.

“I got personally involved, and it bothered me when they would say something negative about my house. I would get a friend or someone to talk directly to the buyers – not a realtor.”

To price her house, she used the internet to see what other houses were selling for in her neighborhood. Pierre wasn’t afraid to go into the transaction because she had owned an art gallery for 18 years, and had sold cars and plenty of things on Craigslist.

She had bought the house for $129,000 and sold it for $290,000. She had gotten married, and her husband didn’t want to live in her house but instead in a house they found together.

Using a service made it a success

Walt and Sandy Kondratieff on Coverdale, Calif., read Lappin’s book before venturing into selling their own house.

“We got a good sense of what we were in for from reading the book, which also introduced us to her website, ListingDoor.com. We took advantage of all the services they offered from the listings on a number of real estate sites to the professional writing of descriptions of our home. And it all paid of extremely well for us,” the couple says.

All of it gave them the confidence they needed to tackle the job and get it done without an agent.

“We never felt that we were out there all alone, not knowing what we were doing. The experience was like having a coach always available to guide and encourage us. We would do it again in a heartbeat,” they say.

Realtors didn’t assess properties high enough

Randy Gunter, who owns a marketing agency – The Gunter Agency in Belleville, Wis., — sold both a home and an office building on his own, and he’s not a realtor.

Both times, we had realtors come in and give us an assessment. Both times, we felt the realtor significantly undervalued the buildings,” he says.

He sold the house for $60,000 more than the realtor was thinking he should list it for. And he sold the office building for $250,000 more than the realtor thought he should list it for.

“We created our own sheet to hand out with all the photos on it. We created a website for the house for sale with the photos,” he adds.

When they had open houses, they baked cookies and had them available.

“We knew we were going to sell the house in advance of the actual sales date. We were building a new home with a new move in January,” he says.

So they took pictures in the summertime with the yard full of flowers, the deck, etc. We knew that over the winter months when the home would be listed that he yard would not be an asset, he explains.

Check your home buying eligibility. Start here (Sep 16th, 2024)

The post People Who Sold Their Homes Successfully on Their Own first appeared on My Mortgage Insider.