Maximizing Your Renovation Budget With A Home Equity Loan In Las Vegas

Renovating a home is an exciting project, but it can also rack up quite a bill. If you’re working with a tight budget or want to make substantial changes to your home, you may be able to get a home equity loan to help finance your renovations.

How can a home equity loan help?

A home equity loan Las Vegas can make renovations more affordable. Like other loans, however, you’ll need to meet some qualifications, including a good credit score. Provided you qualify for a home equity loan, you’ll get a low-cost way to pay for your remodeling project, which leaves you with some extra money in case of emergencies.


The benefits of a home equity loan

Unlike other kinds of home loans, there are no restrictions for using the money from the loan. If you’re wondering how to use home equity for renovations in Las Vegas, the good news is you can use the loan for any kind of renovation.


Types of loans

There are four categories of home equity loans that you may use for renovating your home. Each type has its own conditions and rates, so you’ll want to carefully consider all available home improvement financing options before applying.

Home equity loan

With a home equity loan you’ll be able to borrow money and pay it back over 30 years. The money is produced as a lump sum amount, and you will have fixed rates, which can make it easier to plan your monthly payments over a long period of time.


Home equity line of credit (HELOC)

A HELOC has a variable interest rate, but you can choose to make interest-only payments for the first few years of the loan. A HELOC is also a 30-year loan, but you have some flexibility in structuring your monthly payments. For instance, if you are working with limited finances, you can pay off the interest for the first 10 years, followed by a 20-year payment plan of principal payments and amortized interest. A HELOC gives you access to a predetermined home equity amount that you can borrow against for home renovations as needed. This option is ideal for people who may have other expenses that they’re paying off.


Cash-out refinance

A cash-out refinance allows you to use your home equity if your current mortgage has a higher interest rate than you qualify for. Rather than taking out two mortgages, you can replace your current mortgage with a cash-out refinance, which has a higher balance and sometimes lower interest rates. A cash-out refinance is available for up to a 30-year term, and you can choose between a fixed-rate and adjustable-rate loan.


Home equity agreement

One of the best ways to finance home renovation in Las Vegas if you want to make home improvements but can’t afford the extra payments is a home equity agreement. This arrangement lets you access a lump sum amount of money that is arranged with an investment company. You don’t need to worry about making any payments during the course of the agreement. After the agreement is over, however, you have several options to repay the investor. You can pay in cash if you have enough available, borrow money as you would with a regular loan, or sell your house. If you do use a home equity agreement for renovation financing, note that you won’t know how much money you actually owe until it’s time to make repayments. The final amount you owe may change based on the amount of money that you borrowed initially and your home’s new value.


Financing multiple properties

If you own multiple properties, you can even tap into your home equity to finance renovations for a property other than the one you are borrowing against. For instance, if you have 60% equity in your primary residence, you can take out a home equity loan to finance a remodeling project for a second home that you have less equity in. There are some risks to this strategy, but it can also be a good way to build equity via real estate investing. If you’re using a property with more equity to finance one with less equity, you are more likely to qualify for loans, you will get a lower interest rate than if you borrowed against equity in the second home, and you’ll probably have more lenders to choose from.


Pros and cons of home equity loans

For many people, a home equity loan is a great way to finance a renovation project. Before you move forward with a Las Vegas home renovation loan, however, you’ll want to weigh the pros and cons.

The advantages of a home equity loan include:

  • Lower expenses
  • Tax deductions
  • Increased home value
  • Generous borrowing limit

Home renovations can be expensive, but borrowing money through a loan secured by your home is the least expensive option for borrowing money. That’s especially true for a loan with a longer payback period of 10-30 years, which can amount to you paying quite a bit of money in interest over time.

The interest you pay on your loans may be tax deductible up to $750,000.

Renovations make your home more appealing or more pleasant to live in, and they can also increase the home’s value. If you plan to sell your home at some point, making renovations is worth the investment, as your home’s value may increase.

Finally, a home equity loan allows you to borrow large amounts of money for your home remodeling project. If your home’s value has increased by the time you take out a home equity loan, or if you’ve made progress in paying off much of your first mortgage, a home equity loan allows you to borrow more money than most loans, which gives you more freedom to complete your desired home renovations.

Home equity loans also have some potential drawbacks, including:

  • Increased foreclosure risk
  • Interest is not tax deductible
  • No change in home value

Closing costs

Using your home as collateral means that if anything changes and you can’t pay off the loan, you risk foreclosure.

While some people will be able to deduct interest from taxes, not everyone will have that benefit.

Despite the improvements you see in your home right away, a renovation may not boost your home’s value, especially if you sell your home much later on when the renovations are outdated.

Some lenders tack on closing costs the loan amount borrowed, which may range from 2% to 5% of the total amount.

Home equity loans may be a great way to finance a home renovation, but you’ll want to make sure it’s the right option for you. Contact a loan officer today to plan for renovations and determine the right borrowing strategy.