Here’s how to do it
Home improvements are a sound reason to refinance your mortgage, especially when they positively impact your home’s value. And no overdue roofing or siding project should be sidelined because you aren’t in a position to pay for it the day it’s completed.
If it’s time to refinance your mortgage, you want to do so in the most financially sensible way possible. In order to help you do that, we’re providing the information and resources you need to answer three questions:
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What terms will I qualify for (if any)?
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How do I know whether this is a good call financially?
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What steps do I need to take to get a good deal?
OVERVIEW
One of several reasons people refinance their mortgages is to pay for home improvements by freeing up equity. To do that, you’ll be looking for a cash-out refinance, one of several types of refi. This is basically where you refinance your mortgage for more than you currently owe in exchange for straight cash. If you want to know more about the nitty gritty of cash-out refinancing, nerdwallet* provides this helpful overview.
How do I know what I qualify for?
There are three basic requirements for cash out refinancing.
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Credit. Rocket Mortgage states that a credit score of 620 or higher is typically needed to qualify for a cash-out refinance.
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Equity. With the exception of VA loans, you typically have to maintain 15 – 20 percent equity in your home after refinancing. Equity is determined by subtracting your current loan balance from the current appraised value of your home. If you have 35% equity in a home that was recently appraised at $200K, you could potentially free up as much as $40,000 (math below).
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Debt-to-income ratio. The debt-to-income qualification is the portion of your pre-tax monthly income that goes toward paying off debt obligations. Debt-to-income requirements typically top out at 50%, but all things equal, the lower your debt-to-income ratio, the lower your interest rate.
Is this a good call for me financially?
One advantage of a cash-out refinance is that you’ll typically secure a lower interest rate. But closing costs and other things about your individual situation also influence whether a refi will benefit you.
Fortunately you don’t need to learn a bunch of financial formulas to make the right call. Here’s a quick and easy tool for those of you who aren’t dying to create a spreadsheet:
nerdwallet Refinance Calclulator
This will help you determine whether a refi is worth it once you take fees (and your time) into account.
Get your overdue roofing or siding project DONE with an easy financing option that’s right for you.
Need a window replaced? Leaky roof? Overdue for a siding repair? Contact B&B Siding today for a quote.
We’ve helped hundreds of customers pay for home renovations with 12 months of interest-free financing.
This will help you determine whether a refi is worth it once you take fees (and your time) into account.
*Since we keep referencing nerdwallet, and they aren’t a household name, here’s an overview (We’re not affiliated with nerdwallet):
How do I know I’m getting a good deal?
Just as you would get three estimates to repair body damage to your car, it’s a good idea to compare refinancing rates from different lenders. Since the amount of money at play is more than an auto repair, it’s recommended that you get from 3 to 5 quotes. Both rates and closing costs will likely vary from one lender to another.
Before applying for a refi, make sure to order a credit report so if there are any outstanding debts you’re not aware of you can attend to them. Being denied for a loan is an unpleasant way to find out you have a forgotten or inaccurate credit issue.
Even if you’re able to free up a bunch of equity you probably don’t want to pay for a significant upgrade or repair all at once. But as we’ve written before, interest-free financing is easy to secure for home improvements. At B&B Siding, we offer interest-free financing through Wells Fargo. This is generally a 12-month plan, but it can be another duration based on your individual needs. This has helped hundreds of our customers pay for home improvements, and as with everything else we do, we make it as simple and unobtrusive as possible.
Our mission is to design a new category of Home Improvement Contractors. To provide a service of quality and transparency that others cannot compare to.
Here is another beautiful home on we renovated on Page Ave in Staten Island, New York. Featured is shake and siding color driftwood with charcoal roof shingle color.
“Kamil’s proposal said something about zero interest financing for 12 months, so that’s what put the bug in my ear,” Fred recalls. “I didn’t have the money up-front, so this was perfect. …
“Kamil just asked me a few basic questions over the phone. He got an instant approval, he told me how much it was for. And Wells Fargo sent me a card in the mail. I paid the whole thing off over a year.
“It was more work for Kamil than it was for me.”
If you dread the paperwork that often goes along with dealing with financial institutions, you may be pleasantly surprised by your options.
Go forth and renovate
Well, now you know how cash-out refinancing works, which will provide lots of entertaining conversation next time you meet up with friends for happy hour. While we’re not financial advisors, at B&B Siding we try to make every aspect of working with us as seamless as possible.
*nerdwallet helps people better manage their personal and household finances by providing free online resources to the public, and additional advisory services to members. For instance, they help you select the best credit card for your credit score and lifestyle, secure favorable terms on home refis, reduce debt and identify savings opportunities. In short, nerdwallet is a good resource for any household finance-related issue. So we’ll be referencing them throughout this article.