Last Updated on April 17, 2017
A ‘fixer-upper’ home refers to one that needs plenty of repairs. It is called a ‘fixer-upper’ since it needs to be ‘fixed up.’ Why should I buy a home that needs to be fixed? Many people find it unreasonable to buy such a home. Several reasons exist that make buying a fixer-upper reasonable.
For instance, since these homes are in a less-than-peak condition, it can be a relatively inexpensive alternative compared to purchasing a newer home. Fixing up a fixer-upper might be the only way to own a home that fully addresses your needs. Additionally, you may be an investor that is looking to completely ‘flip’ the home, fix it and then dispose of it for a profit. The other reason that may inform the need to buy such a house is if it has been in the family for generations and you find it necessary to keep it that way. The last reason is that you maybe someone that enjoys such challenges.
Regardless of your reason, it will surely take some substantial amount of cash to initiate the repairs or changes your prospective home needs. Therefore, where will you obtain the money needed?
How About Using Your Credit Card?
You could use your credit card to pay for home improvements, home repairs, and materials. However, nowadays, with the current harsh economic times, it is not prudent to use your credit this way. Credit card companies are now charging a very high minimum monthly payments. Credit card interest rates can also be extremely high.
Can Savings Salvage The Situation?
Dipping into your savings is the other strategy you can use. However, then, is this the best use of your hard-earned money? What if an emergency presents itself and finds you without any funds? Failure to have savings means that when you experience an emergency, you have to utilize your credit card. Again, with minimum monthly payments and higher interest rates, that too can get pretty much expensive.
The best ways to fix your home is by tapping into your current home equity. Here are some of the ways you can achieve this:
Using this strategy, you can obtain cash from your home equity through refinancing your current mortgage for an amount that is more compared to the balance you owe.
-Home Equity Loan
Getting a second mortgage in addition to your current mortgage is very much possible. Home equity loans give applicants lump sums of money to settle significant one-time expense. It is also a fantastic strategy to obtain cash from home equity.
-HELOC (Home Equity Line of Credit)
A HELOC is another excellent way to finance home improvements and repairs. A HELOC is a second mortgage too. However, rather than getting one cash lump sum, HELOC works more like a credit card utilizing your equity as credit. Anytime you are in need; you can draw from it and then pay it off while you use it.
Advantages Of Using Home Equity
Primarily, unlike the interest charged on a credit card, the interest you get charged on a mortgage is tax-deductible. Secondly, the interest rate you obtain on a home loan is usually lower compared to the rate you are charged on a credit card. Thirdly, some loans are available today with an interest-only period meaning that during this time, you only pay a portion of your monthly payment.
Through the ways mentioned above, you can finance your fixer-upper and enjoy added benefits without dipping into your savings or using your credit card.