I've owned my home for four years and I'm planning some renovations. I want to take out about $20,000 to get rid of some trees over the house, rebuild my porch, and replace the flooring. I'm doing the labor myself (except for the tree removal). I keep searching for equity loans but I can't find a way to do this without going through a full refinance, which I'd prefer to avoid. Here are the details of my mortgage: I bought the home for $255,000, it's now valued at $325,000 according to Zillow, and I have $244,000 left on the mortgage with a great rate of 2.89%. Can anyone help me figure out how to move forward with getting this funding?
5 Answers
For smaller amounts like $20k, a HELOC is likely your only option since most lenders won’t do home equity loans unless you're borrowing over $100k. With your good rate, a full refinance with cash out isn’t the way to go either; definitely stick with the HELOC!
It sounds like a Home Equity Line of Credit (HELOC) could be your best bet. Just remember that the interest rates might be higher, and the payback terms won't be as long as a standard mortgage.
You might only get a small HELOC. Considering you have around $80k in equity, lenders typically allow you to borrow about 80% of your home's appraised value minus what you owe. So in your case, that's about $16k. Just a heads up, Zillow's estimate isn't an official appraisal, so keep that in mind!
Credit unions might be a good option for you. Also, is your mortgage rate assumable? I have a similar rate that's assumable, making it an attractive selling point. It's worth checking out!
Typically, you can get a HELOC up to 90% LTV. Just be aware that HELOCs often have variable rates. For instance, when I got mine, the rate was around 5%, but it could potentially rise. Although they're great for quick access to cash, definitely review the terms carefully since you could end up paying interest only for a while before the payments change to include principal. It's a fast way to get funds, but be cautious about how you use it! Good luck!