How to Finance a Remodel

by Washington Federal Team on April 12, 2011

Finance a RemodelMaybe what used to seem quaint is looking a little tired. Maybe what used to be cozy is now too small. Maybe it’s time to get serious about upgrading the plumbing and electrical. No matter your reason, you’ve made the decision to remodel your home, and you need to figure out how to finance it. Between architects, contractors, permits and materials, the cost can add up quickly. However, you have choices that can make your dreams a reality.

Planning a smaller project or do-it-yourself work? One way to finance a remodel is by borrowing against the equity in your home. At Washington Federal, we  offer two types of equity-based loans: additional advances and home equity lines of credit. An additional advance allows you to borrow from your current equity in one lump sum.  That amount is added to your existing first mortgage balance with Washington Federal, so you pay it back over time with your monthly mortgage payment.  This is an affordable option that spreads the cost over the remaining term of your mortgage with us.  Alternatively, with a home equity line or HELOC, you establish a maximum line of credit, then draw out only what you need. This is a revolving line that works a bit like a credit card.  You can borrow and pay back funds as needed.  Each month, you will need to plan on making at least a minimum payment — usually interest only for the first ten years. While both types of loans require you to have good credit and reasonable loan-to-value ratios, they are also flexible, smart ways to fund smaller home improvement projects.

If you’ve got major work planned, home equity loans are not always the best choice. Extensive remodeling can out-strip your available equity, especially if your home needs system upgrades or if you’re doing structural work. Want to add a master suite or second story? An all-in-one construction remodeling loan could be the answer. This type of loan is based on the estimated value of your home after improvements.  To determine that value up-front, we order an appraisal based on your architectural plans. With this all-in-one remodeling loan, you can lock in your interest rate for up to 90 days, and then can rest easy knowing you have a single, fixed-rate mortgage.  You make interest-only payments during construction, with no change in your interest rate after the work is completed. Your loan simply converts to a standard mortgage.

So if you’re ready to take the plunge and remodel your home, you can start the conversation with one of our neighborhood branch managers by calling 1-800-324-9375.

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