Another good reason to improve your home is that if you don’t have a comfortable amount of cash available to make the improvements, you might be able to borrow money by using home loans in Las Vegas for improvements. A popular option is the FHA 203(k) home loan program, which allows you to finance improvements to your house using a mortgage depending on the projected value of the home when the construction is finished.
While it might sound counterintuitive to avoid insurance, you should steer clear of mortgage insurance if you are looking to build equity. Mortgage insurance, unlike home insurance, does not protect against damage or loss to your home. Instead, it only protects the lender in case you default on the loan and a foreclosure becomes necessary. If you make a down payment of less than 20%, you are typically required to get mortgage insurance.
If you decide to refinance your home, one way to build equity is to pay for the costs of refinance closing out of pocket. Refinancing gives you the option of replacing your current mortgage with a new mortgage at a reduced rate or a shorter term. You can also choose to get a different loan. Closing costs are generally in the range of 2% – 6%, but you will need to use equity to pay for them unless you pay out of pocket.
Building equity is also possible by paying mortgage points in order to lower your interest rates. This is a good option for homeowners who have extra savings in the bank.
When looking for a loan, try to avoid getting government-backed mortgages in Las Vegas if you can. Loans backed by the government often come with caveats such as funding fees or mortgage insurance, which may ultimately negatively impact your home equity.
A home equity line of credit (HELOC) and a home equity loan should also be avoided. Otherwise, your equity will be lowered by the amount of money that you borrow. Closing costs with either loan can range from 2% – 5%, which may negatively affect equity.
Contact a professional loan officer today if you want to learn more about equity and how to start building equity in a home.