I Need To Fix Up My Home!
During the mess of the pandemic year that was 2020, so many people have been sitting in their homes, looking around, and deciding to embark on projects that will both improve their surroundings and increase the value of the places in which they live. Whether you are considering making those improvements yourself or hiring out contractors to do the work, one of the first things you will consider is: "How am I going to fund this project?". Interest rates are low right now and will be for the near future, so here are three ideas that could be helpful to help you get the cash so that you don't have to burn through your reserves.
- Securities Backed Line of Credit (SBLOC): One thing that a lot of business owners understand is leverage. They use it all the time to increase business capacity by borrowing against assets of the business to expand. If you have non-retirement brokerage account, you can actually do the same thing using the account as the collateral to back the loan. If the institution you invest with offers them, these are relatively easy to underwrite and open. They offer very competitive rates, and you won't have to liquidate any of your investible assets that you may prefer to keep working for you. If your institution doesn't offer them… well… maybe you should find one that does.
- Home Equity Line of Credit (HELOC): Many real estate investors also like to use the leverage principle when they consider improving their own properties. If you've paid down your mortgage and have equity sitting in your home, consider using some of that equity to improve the property. Most banks offer some type of HELOC option. Credit unions may offer some of the best rates and closing costs. Also consider using a site like Bankrate.com to do some comparisons. Interest rates can be variable, so it may make sense to pay them down more quickly while rates are low, and you are able to pull money out as you need it rather than working with a fixed amount.
- Cash Out Refinance: If you've still got a mortgage with an interest rate that is higher than what's currently offered right now, it could make sense to ditch it and replace it with a new one that includes extra cash for your improvements. This is an expensive option because of the closing costs required, but if you plan on staying in your home, you could recoup those costs several times over by reducing either the interest rate or the term length of your loan. You will definitely want to do some research first. Step # 1 is checking your credit score to make sure you'll be able to get the "good rates". Step # 2 is to shop around once again for providers with low rates, closing costs, and fees. Once you've made your decision on who to go with, make sure that you gather all the documentation you'll need to supply them and then diligently follow up with them to make sure the process keeps moving as smoothly as possible.