Refinance and Remodel Your Home

Stuck between the options to go for a refinance or to hold back until home improvements are done? You might possibly be considering a construction loan as well to complete your addition, and then later refinance your mortgage. But there once again, you may feel stuck; should the value of your new addition exceed your appraised value? So, the bottom line is to go for improvement or refinancing? How about if we tell you that you could go for both!

Earlier, there were two distinct ways which people would opt for when they wanted to utilize the equity of their houses for house improvements. Based on their current appraised value, they’d obtain an equity loan. Or put some construction plans and specifications together, include some contractor’s bid and acquire a construction loan.

If you look at it, both the ways fall under second mortgage loans.

The amount for equity loans are based upon the ongoing market value of the home, and the construction loans are mostly set according to the “as finished” value of the home. In simpler terms, that’s the value of the home after the improvement work is done. We all know that while doing a major remodeling of a house, often the construction costs surpass the property’s current value. And when that happens, due to the absence of any equity in the home, lenders are not the party to offer their best programs.

Rates on second mortgages are often higher than the rates on a first mortgage. Also, in the instance of a line of credit or an equity loan, the interest rate is never stable. Initially, it’s lower but later it starts climbing higher. Problematic!

Then, if you were to acquire a construction loan or equity loan, the rates would be mostly higher than your current first mortgage finance. And if the construction phase goes on for two to three months, you can’t count on the interest rate to stay where it was earlier.

Problems, problems, problems… But not anymore.

There are lenders who offer a mortgage finance, which takes care of both the issues. You can now not only refinance a current first mortgage into a lower rate, but also simultaneously borrow more for home improvement. All at today’s lower rates, avoiding higher rates and variable construction loan terms. Fascinating!  

So, let’s say, you are looking forward to add an extra bedroom or an extra floor as an improvement to your home. For example, your current mortgage is somewhere $180,000 while the appraise amount for your house is at Rs. $200,000. Not much scope for equity loan here. The improvement you have in mind will cost $100,000. So after the completion of construction work your new value will be somewhere close to $300,000. Now, thanks to the new mortgage programs, you can borrow funds for your dream home improvements using the “future” appraised value of your renovated home, along with all the equity that follows with it. Plus, the refinance will be available at competitive rates. Exciting, huh?

However, the ratio of these lenders is low. You might have to check with a lot of lenders to come across the ones with the new programs. But to get a construction loan along with a regular finance is worth the effort. So don’t let old experiences stop you anymore from transforming your house into your dream house.

Why Wooden Flooring is a Good Investment for Your Home

Wooden floors bring nature inside and that is their biggest charm. Hardwood flooring is particularly popular in open floor house plans.

Though more expensive, wooden flooring tends to last a lifetime and that makes it cost effective. Ceramic tiles are still the most popular flooring materials for homes. Hardwood flooring is also gaining popularity. In fact, the number of homeowners who get wooden flooring has consistently increased over the last few years.

The impact of great flooring

When you walk into a home, the first element that catches your attention is indeed the flooring. Flooring creates the ambience and binds the different parts of the home together. The flooring used in kitchens and large rooms is particularly important.

When you run wooden planks of the same color and the same species along the length of a room, the result is simply spectacular. For an open floor plan, it creates a seamless look.

Hardwood is still less popular than ceramic tiles because it is more expensive. However, its popularity is steadily increasing. Hardwood flooring is more common in high-end, luxury homes. Entry level homes, too, have started using hardwood flooring.

Why wooden flooring is better

Wooden floors last forever. That is the main reason people get them. If you install flooring that doesn't last for a long time, you will have to take it out at some time. This is a major disruption and it will cost you dearly. On the other hand, when you install wooden flooring, you can rest assured that the floor will outlast your home.

The housing market in the US is showing signs of recovery. The value of homes, too, has appreciated over the last few years. Many people now have considerable equity in their homes. And they are eager to further increase the value of their homes. As a result, they opt for materials that last a long time and have good resale value. Wooden flooring provides good return on investment. Appraisers too have started recognizing its value. This also makes it more popular as a flooring solution.

People now use wooden floors of all kinds. They mix raw finishes with polished one and dark hues with light hues. The black and brown shades are now giving way to lighter ones. That said, the grays aren't going away.

As far as the finishing is concerned, more and more people are getting matte finishes probably because they are better at hiding imperfections. When you use matte finish, you do not have to worry about the scratches on the surface of the wood.

Interestingly, the planks aren't just getting lighter; they are also getting wider. However, before installing a wide plank, you need to examine the quality of the wood.

Solid or engineered?

Solid hardwood tends to be more popular than engineered hardwood. Nearly two-thirds of homes that have wooden flooring use solid hardwood. One-third uses engineered hardwood. Laminates and vinyl sheets can also provide the wooden look. Bamboo and cork are also good alternatives. However, when it comes to wooden flooring, the challenge is to produce the effect that attracts the homeowner to hardwood. Wood exudes comfort and warmth. It brings the nature inside and that is its biggest plus point. Look-alikes can't beat its charm.

Common Refinancing Options Offered by FHA

Now that interest rates are pretty low, many homeowners are looking to refinance their existing mortgage. Lenders have also sensed this interest in refinancing and are trying to attract borrowers by offering special schemes. While some lenders offer mortgage refinance with no-appraisal, others promise mortgages with no closing costs. This leaves the borrower confused.

How can a borrower decide which refinance program is the right for them? Interestingly, there is no such thing as a right or wrong refinance program. It all depends on your unique financial situation and goals. When it comes to refinancing, you have got mainly two options: the FHA Positive Equity Refinance and the FHA Streamline Refinance.

FHA Positive Equity Refinance

This is another refinance program approved by the Federal Housing Administration. This is the refinance option mainly offered by national home loan companies like PennyMac. 

The FHA Positive Equity Refinance is reserved for homeowners who have non FHA-insured home loans. In order to qualify for this refinance program, buyers should be current on their monthly mortgage payments. Homeowners who have negative equity on their home are eligible to get refinance through this program

The FHA Positive Equity Refinance will give borrowers a 30-year fixed rate mortgage. In addition, the borrower will be eligible for a reduction of at least 10% in their mortgage balance. There will be no closing costs.

In order to qualify for this refinance program, you need to meet the criteria specified below:

•        Your home loan is not backed or owned by Freddie Mac, Fannie Mae, FHA, USDA or VA.

·         The amount you owe on your mortgage is higher than the value of your property.

·         You make your monthly payments on time.

·         You qualify for the mortgage under the standard underwriting requirements specified by FHA.

·         The home is your primary residence.

·         Your total debt amounts to less than 55 percent of your total monthly income.

Borrowers who have been convicted of theft, fraud, forgery, felony larceny, tax evasion or money laundering in association with a real estate transaction within the last ten years are not eligible for this program.

FHA Streamline Refinance

This FHA refinance program is reserved for borrowers who have a mortgage insured by FHA. When you choose this program, you will get to adjust the term of your mortgage and interest rate. Better still, this program has relatively simpler underwriting requirements. That means there will be no new credit checks, home appraisal, or documentation. Since there will be no new home appraisals, this option is ideal for borrowers who are underwater on their mortgage.

Applying for this mortgage refinance program is relatively easy. You will qualify if you have a mortgage insured by FHA. Your repayment history over the last 12 months should be clean. You will also be required to prove that you didn't refinance in the last 210 days.

There is yet another requirement. The applicant has to prove that they will benefit substantially by getting a refinance. In other words, they should be able to reduce their monthly mortgage payment by at least five percent.