I want to make home improvements.  My home is twenty years old and needs to come into the modern era.  I don’t have the cash it would take to do the work.  Should I refinance my home loan to pay for the costs?

This is a common question.  After a certain time, everyone wants to refresh the look of their home.  If you bought a new home, the yearning will come later rather than sooner.  If you own an older house, home improvements may be a mix of safety issues and wanting a more up-to-date style.

Regardless of what type of improvements you want to make to your home, refinancing could be your answer.  There are a few things to consider first before making a final decision about anything.

1.  Get estimates.  It is hard to know how much money you need if you don’t know what it will cost.  Home improvements that are really home repairs such as wiring upgrades for an older home or putting in energy efficient storm windows can cost a pretty penny.  Go through the process.  Get an idea of what it will cost and choose the most reasonable estimates.  Add up the costs for what you need or want to change and that will determine if refinancing is a good option.

2.  The size of the job.  This hits a little on the first point.  Home improvements that cost around $10,000 to $20,000 can be covered with a refinanced loan.  If your home has appreciated significantly because you live in a popular area, the amount of the cash payout could be enough to cover that amount.  And you will still have one payment to make each month.  Larger jobs that require more cash could be served best by a second mortgage if you have the equity to back up the new loan.

3.  Future plans.  How long will you continue to live in the home?  The time frame is important because if you are planning on moving in the next few years, only make home improvements that will enhance the value of the home.  Putting in hardwood floors or butcher block countertops is okay, but painting may not be a good idea.  The new owners may have other tastes.  Besides, why spend all that money on a second mortgage if you plan to sell the home?  Refinancing can cover the smaller improvements and leave some cash in your pocket.

4.  Can you pay over time?  Many companies offer financing of their own for home improvements.  You can make a lump sum payment and pay the rest over time.  If your credit is good, you will have a low interest rate.  You could even have a deal where you pay no interest for a certain amount of time.  This is a better option than refinancing for the home improvements if you can get it.

Home improvements are a good reason to refinance a home loan.  But do consider the four items above.  There could be other options that are better for your situation.