Prescribing Wealth in Real Estate
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Renovation


Some renovation loans are used to "Flip" properties and others are for the home owner's to enjoy their home for years to come. The idea behind the concept of "Flipping" is that the completion of a few choice remodeling projects will add significant value to the price of a home. With this in mind, many homeowners undertake major renovation projects before putting their homes up for sale with the idea that sprucing up the place will result in big bucks. More often than not, these upgrades fail to pay for themselves.

Updating an investment property is generally a sound strategy because successful advocates of the fix-it-and-flip-it philosophy buy run-down homes at bargain prices and save money on the repairs by doing most of the work themselves. A littlesweat equity goes a long way toward making a real estate investment profitable.

Investors carefully choose their remodeling projects, focusing on those that will result in the most value for the least amount of effort and cost. Part of the process includes paying attention to the other homes in the neighborhood to avoid over-improving the property. If none of the other houses in the area have crown moldings and Corian counter tops, adding these amenities is unlikely to result in a significantly higher selling price.

Owners, on the other hand, often take a less strategic approach to remodeling when sprucing up their homes prior to putting them on the market. As a result, they can end up putting significantly more money into the project than they will get back out of it when they sell. To make the most of your remodeling projects, it pays to keep four types of projects in mind : basics, curb appeal, value added and personal preference. renovation loans can also be offered in the form of a "Cash-Out" refinance.

A "cash-out refinance" transaction occurs when the new mortgage amount is greater than the existing mortgage amount, plus loan settlement costs. The purpose of a cash-out refinance is to extract equity from the borrower's home. A cash-out refinance is an alternative to a home equity loan.

Cash-out refinances are a popular way for borrowers to access the equity in their homes to pay down consumer debt, make additional purchases, or make home improvements. Borrowers need to make a risk-based assessment of whether extracting equity from a home is economical. Borrowers also need to be aware that refinancing a mortgage has costs, including the fact that the lender may charge a higher interest rate on a cash-out refinance than a rate-and-term refinance."
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