If you’re thinking of paying cash for home improvements, you may want to think twice. Here are three reasons why you may want to consider a cash-out mortgage refinance or home equity loan instead:
1 – Preserve your cash: a large home improvement project could quickly deplete your savings. Think about this project in the context of the next 3-5 years. What other large expenses could crop up during that time period, and would it be useful to keep your savings on hand for those items?
2: Opportunity Cost of Money: would it more useful to invest that money in a college savings plan or retirement account? For example, if a home improvement loan costs less than what you’re earning in your investment accounts, you may be better off investing your money instead of paying cash for the improvements. Talk to your financial advisor for more details.
3: Possible Tax Advantages: you may be able to deduct the interest on your new mortgage or home equity loan if you itemize your tax deductions, and if your total aggregate mortgage and home equity balances are $750,000 or less. Please see a CPA or tax advisor for details.
Keep in mind that house prices have improved in many markets, so you may have enough equity in your home to refinance your mortgage or take out a home equity loan for home improvements. Also, interest rates are still very attractive, so you may want to act now instead of waiting.
Contact me to explore your financing options!