If your new home is affordable but not your dream home, you may wonder if you have to just accept your situation. Well, there is both good news and bad news, and also a solution on how to make your dream home possible.
The Good News
The good news is that you finally have your own home. No more landlords. No more maintenance people hammering around the house when you haven’t had enough sleep. No more gardeners ruining your peace of mind on a Sunday morning with their power tools. It’s your home now, and you can choose the maintenance and gardening schedule that suits you.
Also, from an economic perspective, Warren Buffett would have been proud of you. In a real estate article on aol.com, he said: “Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford,” says investor Warren Buffett, the third-richest man in the U.S., who still happens to reside in the 6,000-square-foot stucco house he bought in 1958 for $31,500.”
The Bad News
The bad news is, it’s not your dream home.
- It’s smaller than you had hoped.
- It was not built with the best building materials.
- You always wanted a master bath, but now you only have a shower stall.
- It’s not designed for low maintenance. One glance at the the roof and windows tells you that they were not built for the long run. And it doesn’t have the insulation you need to lower your energy bills.
In short, it’s a comfortable home, but it doesn’t have all the features you want. You’re still dreaming about rustic beams on the ceiling or granite countertops. Some new lighting fixtures would be nice, too.
It was affordable because construction costs were low in building the house. And parts of the house that show it. A little too much vinyl, Styrofoam, brick, and drywall went into its construction.
At this point, you have three choices. One, just accept what you’ve got. Two, make small changes over time. Three, refinance and get the money you need for a home makeover.
What is refinancing? Here’s a brief description:
Refinancing your mortgage is applying for a new loan. You’re paying your old loans off and replacing it with another one. Since it’s a new loan, you will have new terms. So, the lender will ask for documentation to see if you qualify.
Specifically, the lender will ask for your credit score, payment history, income, and employment history. You will also have to disclose your assets. These can include your saving accounts, your retirement account, and your stock portfolio. You’ll also need an appraisal to figure out your home’s current value.
If you are a veteran, you’ll be surprised at how much Low VA Rates can help you if you’re thinking of refinancing. Also, you may be eligible to earn specific refinance options for the goals you have in mind.
Reasons to Refinance
There are many reasons for refinancing your home:
- It will help you pay off your current mortgage. This includes closing costs. What’s more, you’ll have money to spare.
- The new loan you get may have lower interest.
- You can get immediate cash to pay for some major home improvements.
Refinancing for Home Improvement
When you refinance your home for home improvement, you have to be clear about your reasons. The goal should be bigger than just improving your home so that it’s closer to your dream home. Your renovations should also be able to increase the resale value of your home.
In an article entitled “Reason No. 2,397,780 to Refi Right Now: Cash for Home Improvements,” Realtor.com offers an upside and downside perspective.
The Upside Perspective:
“The best use of cash-out refinancing is for home improvements that increase the value of your home. However, not all home improvements increase resale value, so select your home projects carefully to get the most bang for your buck. (Among the best-sellers in home improvements today are kitchen and bathroom upgrades.)”
The Downside Perspective:
“However, keep in mind that home improvement projects don’t offer a guarantee. If you were counting on your home appreciating in value as a result of your home renovations and recouping your expenditures when you sell, you could be in trouble if your home’s worth doesn’t increase or if real estate values fall—leaving you owing more than your house is worth. At this point, you would be upside down on your loan and have negative equity.”
So when deciding whether you should refinance for home improvement, you have to carefully think about it. Before you make a final decision, do some research? It’s essential to find out if your planned improvements will increase the resale value of your home. If it does, then you can both have your dream home and stay on the right side of financial wisdom.