When we think of rising interest rates, we mostly think of how it affects the purchase of new homes – but it also affects the financing of real estate projects.
Today’s high interest rates can make financing real estate projects difficult – but it doesn’t have to be that complicated.
“Lifestyles have changed a lot over the past two years,” said Mischa Fisher, chief economist and housing expert at Angi. “Your home may no longer meet all your needs. However, instead of moving out and buying a new house, you might want to consider staying put and renovating. Staying put and remodeling means you can keep your current mortgage and a low interest rate on that mortgage instead of moving into a more expensive house at a higher mortgage rate, which really may be a better deal in this moment.
If you have the funds, you can avoid the extra interest payments of a remodel by paying in full. If you need financing for your project, you can choose between personal loans, home loans, credit cards and withdrawal funds.
“Even with high interest rates, there are ways to take advantage of the current macroeconomic environment,” Fisher said. “First, make sure you’re really shopping for materials. Some of the price inflation we’ve seen over the past two years is really starting to come down over the past few months, so be sure to shop around. The other thing is to make sure you’re really aware of the different trade-offs of the different loan products you get, and to avoid products with high interest rates to potentially avoid those high payments because interest rates should increase further. ”
Try to plan as much as possible. This will ensure you have a great pro and give you time to work out a budget and schedule that works for you.
“Home equity is the amount of value you have in your home after subtracting the amount you still owe on your mortgage,” Fisher said. “Right now, many households, millions of people, potentially even you, have fifty to a hundred thousand dollars or more of additional new equity that didn’t exist before the pandemic. This can be a very cost-effective way to tap into relatively inexpensive ways to finance a renovation project. If you use something like a home equity line of credit or other products that take advantage of it, you can get financing for your project at a much lower rate than with credit cards. Be careful though, because with these products you run the risk of losing your home if you can’t make the payment. Just like a mortgage, it is tied to your home, so you need to be very careful and comfortable with these trade-offs.
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