Can I borrow more than the house is worth? If I’m pre-approved for up to a $200,000 loan and the house I want to purchase is only $150,000, can I get a loan for $200,000 and use the remaining $50,000 for remodeling?
With home remodeling on the rise, we get asked this question a lot. Unfortunately, that means we have to tell a lot of people that it isn’t possible to borrow more than the house is worth. If the house you are purchasing is $150,000, that’s all the money we can give you in a mortgage minus the down payment. We also find that most of our clients don’t purchase homes at the top of their pre-approval range, since all loans require at least 3-5% down.
However, there are several alternatives you can use to make those coveted remodels sooner rather than later, all without tapping into your home’s equity. Since you’re just purchasing your home, you probably won’t qualify for a home equity loan or line of credit.
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So, for new homeowners looking to remodel right away, we recommend the following methods as alternatives to using your home’s equity for a loan or a line of credit.
Personal loans are a popular method to pay for smaller home remodels in the $200-2,000 range. They generally require good to excellent credit to qualify and are shorter loans, think 5-7 years. That means your monthly payments will be higher, but you’ll also be paying less interest overall.
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For smaller home remodels, credit cards might be a viable option. While we don’t recommend racking up thousands of dollars in credit card debt, if you can pay off your monthly balance in full, this is the way to go. Generally, this option is best for people who have the money to pay for the remodel, but it’s just not easily accessible. Credit cards allow them to get started right away while they gain access to the money.
Saving up the Money
We know, this one isn’t an immediate option, but it’s our favorite. By saving up for home remodels, you forego having to pay interest at all. This option is best for home remodels that aren’t necessary – think looks rather than functionality. Are those new quartz countertops necessary to cook in the kitchen, or can they wait a year?
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The options listed above are great for buyers wanting to remodel immediately. After you’ve been in your home a few years, a home equity loan or line of credit are great options.
As your mortgage lender, we’d love to discuss all of your options with you. Here at Mortgage Specialists, we look at more than just your mortgage – we look at how it will affect your long-term financial goals. Give us a call at (402) 991-5153 with any questions you may have. We’re available to answer your questions at any time, day or night!
Ready to start the mortgage process? Our online application takes anywhere from 5-20 minutes to complete. Once it’s submitted, we can have you pre-approved for a loan in just a few hours.