Now that you've lived in your home for a few years and built up some equity, you might want to use a second mortgage to make some improvements.
There are many ways to improve your home. Things like a new kitchen, bathroom, roof, siding, and so on.
There are three ways to get a loan for home improvements or a second mortgage. Refinancing with a home equity loan, a home equity line of credit, or cash out.
A home equity line of credit would be my suggestion. (HECL)
The HECL is a great loan for people who own their own homes because they don't have to use the money right away. And when you decide to use the money, you only use what you need.
Let's say you have a $25,000 line of credit against the value of your home. The lender will give you this money as a line of credit that you can use when you want to. You also get a chequebook with the line, so you can write checks whenever you want.
You get a lump sum from a cash-out refinance or a standard home equity loan, and you start paying back the interest and principal right away.
On the HECL, you only pay interest and principal on the amount you use.
So, let's say you pay a contractor $15,000 to install a new bathroom in your house. After you finish the project, all you have to do is write a check from your HECL check book.
Your monthly payments would start at this point.
Most HECLs are paid off over twenty years, and for the first ten, only the interest is due. So, before you close, make sure you know when the payments are due.
Making changes to your home is a great thing to do. It not only makes your house worth more, but also makes your life better. And you can get a tax break on the interest.
Always keep learning, and make sure to shop around to find the best deal.
