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Financing Your Renovations

By Greg Smith Published 03/9/2007 | Real Estate
If you are looking to add some value to your home to improve its value and selling price then renovations are the answer. Its a proven fact the buyers are attracted to homes that have a clean and new look to them. Even heritage homes are more popular when rooms are renovated and given a facelift (within the original style of course). Kitchens and bathrooms are great examples of this. Nobody likes tired, old, outdated appliances that do not work properly and use large amounts of energy. Why not rip them out and put in some new stuff that compliments the theme of the room and saves money at the same time?

Of course the question arises of how to fund these improvements? Well there are a few options. The first of these is the easiest. Win the lotto and pay for them in cash. Of course if this does not work out, there are other ways. One of the most common is the second mortgage. Re-financing your home is a very common process and many of these type of loans are designed precisely to fund additions and renovations. This kind of loan is based on the amount of equity that you have accrued in your home. The easy way to figure this amount out is to take the total value of your home and subtract what you have paid off on your existing mortgage. This will give you the amount of accrued equity. For example, if your home is worth 300,000 and you have paid off 150,000 then you have 150,000 in equity. These loans are available at low interest rates as the loan is secured by the home's equity.

Another type of financing is known as a home owners line of credit. Again this amount is based on the equity you have in your home, with the difference that this loan has no limit save your equity amount. It works much like a credit card where you may borrow as much as you like as long as it does not exceed the equity limit. This is quite a popular choice as it allows room for unexpected costs that always crop up during renovations. As with the other loan option, the amount of the loan itself is secured by the equity. No matter which option you choose, the value that can be gained by a renovation is impressive. It is more than enough to justify the time and effort.

Greg Smith is the managing Broker of Re/Max Alliance & President of Hinkelman, Smith & associates. Hinkelman, Smith is the premier Colorado real estate company. For more info on the Boulder real estate market contact Greg today or visit us on the web at www.boulderhomesource.com