How a Second Mortgage Can Be Used For Home Renovations

To stay up with the latest trends, homeowners are constantly needing to renovate their home. Updating your house every few years can really drain your finances, so what homeowners are doing now is obtaining a second mortgage to fund their home improvement projects.

So how exactly does it work? Well, to help you get a better understanding, our team at Lotus Loans & Mortgages have listed how a second mortgage can be used for home renovations.

Home Equity

The most common way homeowners pay for their renovation projects is by accessing their home equity. This can only be done through a second mortgage, or by selling your home. However, if you wish to stay in your home, getting an additional mortgage is your best option.

How much equity you have in your home determines what kind of rates you will receive on your Brampton second mortgage. You will need to have at least 20% of your home paid off in order to receive low-interest rates. To figure out how much equity you have, all you need to do is subtract the total value of your home by your loan balance. For example, if your home was appraised at $350,000 and your mortgage is for $300,000, the amount of equity you have in your home is $50,000.

How It Works

A second mortgage is where you are able to borrow against your home by accessing your equity. In doing so, your home is put up as collateral in case you default on your payments. You can obtain a second mortgage by getting one large sum and using that money for multiple improvement projects. Or you can take out a line of credit, which is more of a “pay as you go” option. A home equity line of credit (HELOC) mortgage is just like a credit card where you have money available to you but you only have to pay back the amount you have spent. This may be your best option if you are unsure how much money you need upfront.

Benefits

There are many benefits associated with a second mortgage. The first being you can generally borrow a large amount because your second mortgage is secured by your home. Another benefit is that you can receive tax deductions if you are renovating your home to make it more accessible due to a disability or illness.

Also, if you are applying for a second mortgage for renovation purposes, you can receive a large return on investment depending on what areas of the house you renovate. Talk to your local lender to find out which renovations give you the biggest return on investment.

Top Renovations That Have The Highest Return on Investment When Selling Your Home

If you are looking to sell your house but want to take part in a home improvement project beforehand, you can access the equity in your home to help pay for the renovations by obtaining a Brampton second mortgage. To help you get started, our team at Lotus Loans & Mortgages have come up with four renovations that have the highest return on investment when selling your home.

#1: Curb Appeal

Having a great curb appeal can increase the chance of buyers being interested in your house since this is the first impression your home makes. This will give you an excellent return on investment because if you have a bad curb appeal, you could deter buyers from ever entering your home. As a consequence, your home could potentially sell way below asking price. Some tips that can help increase your curb appeal would be to add new mulch and plant flowers to help freshen up your garden.

#2: Replace Vinyl Siding

If your home’s exterior is currently coated with vinyl siding, this look is outdated and should be renovated to make your home look more appealing. Consider replacing the vinyl with manufactured stone veneer. This project can cost around $8,200 and can have a resale value of approximately $7,900, which would give you a 97% return on investment.

#3: Replace Your Front Door

You can replace your front entry door for a nice steel door with a half-glass panel for around $1,500 and make about 91% back on the resale value. This has a great return on investment and can really increase the aesthetic appeal on the front of your home.

#4: Kitchen And Bath

If you are looking to update the interior of your house, you should start with the kitchen and the bathrooms. These parts of the home can make or break a decision for buyers. Even doing minor renovations in these areas can give you 100% return on investment so don’t shy away from obtaining a second mortgage in Brampton to fund these improvements.