Home values here in Utah have been on the rise for the past few years, and continue to trend upward. Pair that with the historically low interest rates we are experiencing and that equals great news for homeowners who are looking to use the equity in their homes to pay for remodeling, which can be done with a few different options detailed below:

Cash-Out Refinance

A cash-out refinance replaces your existing mortgage with a new home loan for more than you owe on your house. The difference goes to you in cash and you can spend it on home improvements. Here’s how a cash-out refinance works:

  • Pays you part of the difference between the mortgage balance and the home’s value.
  • Has slightly higher interest rates due to a higher loan amount.
  • Limits cash-out amounts to 80% to 90% of your home’s equity.

Home Equity Loan

A home equity loan is essentially a second mortgage with a repayment period of 5, 10 or 15 years, along with a set schedule of payments that include both principal and interest. Here’s how it works:

  • Payments are structured and begin right away, which makes it easier to budget.
  • The rate is fixed, so the amount you pay will stay the same amount each month.
  • All money is disbursed upfront, making the loan a good option for large-scale improvement projects.
  • The interest you pay on home equity loans may be tax deductible if the money is used to remodel, repair or otherwise improve the home.

Home Equity Line of Credit (HELOC)

The majority of HELOCs have a draw period and a repayment period, but here at Ascent CU, our HELOCs provide an evergreen line of credit. The draw period is the amount of time you have to use the line of credit you were approved for. Once that period expires, you can no longer withdraw funds, and you must start repaying the full loan. Here’s how a HELOC works:

  • You can use as much or as little money as you need and only pay back what you use.
  • Interest rates are usually lower than unsecured credit.
  • During the draw period, you may be given the option to make interest-only payments.
  • The interest you pay on HELOCs may be tax deductible if the money is used to remodel, repair or otherwise improve the home.

Investing in your home is a smart idea, whether you’re looking to sell or just create a more comfortable space for yourself and your family. If you’re tossing around the idea of selling your house, renovations may help your home sell more quickly and for more money.
We have mortgage experts ready to help you find the best option for your remodeling plans, and we strive to make the process as easy and painless as possible by providing fast, local loan decisions and one-on-one service throughout the entire process – you won’t be passed from person to person. Give us a call today or stop by a branch to speak with one of our mortgage experts.