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  • Writer's pictureMontana Hooks, Bay Area Realtor

3 Ways To Finance Your Bay Area Home Upgrades

If you are considering upgrading your home, your next thought was likely, "How am I going to finance it?" Here are several great options to consider:

Home Equity Line of Credit (HELOC)

Simply stated, a Home Equity Line of Credit (HELOC) is a line of credit based on your home value that you can continually borrow from and pay back over a set time frame. HELOCs can be good people who need funds for ongoing home improvement projects or

who need more time to pay down existing debt. HELOCs typically have

lower interest rates than home equity loans and personal loans. In order to

get the best rates, you will need to have a high credit score, a low debt-to-

income ratio and a lot of tappable equity in your home.

Cash Out Refinance

A cash-out refinance provides a homeowner a set amount for

a renovation that is then rolled into a new mortgage total, according to

Dawn R. Cameron, a home mortgage consultant and renovation specialist

with Wells Fargo Home Mortgage.

Here's an example: Let’s say a house is worth $200,000, and the mortgage

is $100,000. The homeowner has 50% equity and the home renovation

project will cost about $60,000. For a cash-out refinance, the original

mortgage is paid off and replaced with a new mortgage of $160,000, giving

the homeowners $60,000 in cash to do with as they please.

Home Renovation Partners

For homeowners who have very little equity, renovation financing might be

an option. It's similar to cash-out refinance, but instead of basing the loan

on what the house is currently worth, a lender bases it on what the house

will be worth when the renovation is complete.

"For renovation financing, homeowners refinance their current loan but add

on to it an amount needed for the home improvement. The lender then

pays the contractor as the work is being done, so the bank is able to

ensure the collateral is secure," according to Cameron.

Financing a home project takes planning. Homeowners should

consider all the options and choose the financing path that is best for their

project and financial situation. When looking into different loan options,

consider talking to multiple lenders to get the best terms.

About the Author

Gabrielle Hooks is a SF Bay Area Realtor focused on the East Bay. Raised in Fremont and a resident of Oakland since 2013, she knows Richmond to San Jose like the back of her hand.

Performing live karaoke, maintaining her house plant garden and rollerskating are a few of her favorite things (#FirstTimeHomeBuyers too!)

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