Yes, you can refinance a mortgage to make home improvements or for virtually any reason.
To understand how this is possible, you’ll need to understand what happens when you refinance your mortgage. Refinancing is basically just switching from your current home loan package to a different one. You don’t even have to switch to a different company; it’s totally possible to refinance to a different package with your current lender
There are plenty of good reasons to refinance a mortgage, so you’ll need to evaluate your specific situation to decide if it’s right for you. One of the most common reasons is to change from a variable to a fixed-rate mortgage, especially when interest rates are predicted to rise. Some choose to refinance so that they can use their home equity for additional loans. Depending on the market, you may also be able to refinance to secure a better interest rate.
If you’re looking to make home improvements, however, a cash-out refinance is likely your best option. This is essentially where you refinance your home for more than you owe on it, and you get the difference in cash. The more equity you have on your home, the more cash you’ll get from refinancing. You can control how much of your home’s value to refinance, and a cash-out refinance can be a great option if you can get a good interest rate on the new loan and have a sensible plan for the money. These are some of the best home improvements you can make after refinancing.
Bathroom Renovations
A bathroom remodel is one of the most sensible changes you can make to the interior of your home, and you don’t have to break the bank to increase your home’s value. Even moderate changes like updated lighting, new tiles, or new counters can improve your enjoyment of your home and add value. If you really want to “future proof” the bathroom, you could work on making it universally accessible. Adding support bars, widening doors, or installing a walk-in shower are all great steps. These features can be useful for your own family’s changing needs in the future, or they can make your home more valuable for potential buyers who need them.
Outdoor Additions
You have plenty of options when it comes to outdoor living spaces, and they generally offer a great return on investment for homeowners. Wooden decks are great additions for function, style, and value. A deck gives you enough space to add furniture, an outdoor cooking area, a garden, and more. They’re great for cookouts and gatherings with friends, and they can increase your home’s resale value significantly. If you don’t want to commit to adding the extra square footage with a full deck, an overhang or other yard covering can still boost your home’s functionality without costing as much. Naturally, bigger additions like swimming pools come at a much higher cost and can be a higher risk for reselling purposes, but they can really add to your enjoyment of your home if you plan to stay long term.
Energy Efficiency
Home improvements don’t all have to be big undertakings that cost thousands of dollars. You could spend your money on several smaller upgrades that will save money in the long run. Making your home more energy-efficient is a great way to do this. Sure, you could spend the money on residential solar panels or replace all your appliances, and these may be great ideas depending on your area and budget. Even small changes like adding more insulation in the attic and walls, sealing spaces around doors, or installing energy-efficient windows can have a noticeable impact on your electric bill.
Refinancing a mortgage can be a smart financial move in many circumstances. Make sure you know what you want to use the money for and stick to your budget if you decide to commit to it.
