Refinance to Get Your Home Ready for the Holidays

A kitchen that works perfectly well most of the year can suddenly feel crowded when everyone gathers in it. A seldom-used dining room becomes important again. Overnight guests make you wish you had finished the basement—or finally tackled that extra bathroom. And all those little projects you’ve been meaning to get to can become much more noticeable when you’re spending more time at home.

If the approaching holidays have you thinking about home renovations, it may be a good time to look beyond the immediate season and consider what would make your home work better for you all year long.

When your needs change, moving isn’t the only option.

Maybe you love your neighborhood but need another bedroom. Perhaps your kitchen no longer works for a growing family. You might want a finished basement for more living space, a dedicated home office or updates that make your home more comfortable and functional.

Before you start scrolling through real estate listings, consider a different question: Could improving your current home give you more of what you need?

For homeowners who have built equity, that equity may also provide a way to finance larger improvements. Depending on your goals and financial situation, a  cash-out refinance or home equity line of credit (HELOC) could be worth exploring.

With a cash-out refinance, you replace your existing mortgage with a new, larger mortgage and receive a portion of the difference in cash. Those funds can then be used for renovations, repairs or other financial priorities.

That can make cash-out refinancing one option for substantial projects, such as a major kitchen renovation, finishing a lower level or making several improvements at once.

But accessing equity shouldn’t be the only consideration. Refinancing changes your mortgage, so it’s important to look at your current interest rate, the rate and terms of a potential new loan, closing costs, how long you expect to remain in the home and your broader financial goals.

In other words, the question isn’t simply, “Do I have equity?”It’s “Does using it this way make sense for me?”

If your goal is home improvement, refinancing isn’t your only potential option. 

A cash-out refinance replaces your current mortgage and provides a lump sum of cash from available home equity. That may make sense when you know approximately how much a larger project will cost and refinancing your existing mortgage also fits your financial goals. 

A HELOC, works differently. Instead of replacing your first mortgage, it provides a revolving line of credit secured by your home. You can borrow as needed up to your approved limit and pay interest only on the amount you use. 

That flexibility can be helpful when renovations will happen in stages or when project costs aren’t completely predictable. 

Neither option is automatically better. Your existing mortgage, available equity, project, budget and long-term plans all matter. 

There can be a strong temptation to set an ambitious deadline when guests are coming.

But a home improvement that makes financial sense for the next several years is more important than having everything finished before the first holiday gathering.

Instead of asking what you can accomplish before the holidays, think about what you’ve noticed:

• Where does your home feel crowded?
• Which rooms aren’t being used effectively?
• What repairs keep getting postponed? 
• Have your family’s needs changed since you bought the home? 
• Which improvements would make everyday life easier—not just entertaining? 

You may discover that the project you really want isn’t the cosmetic update you first had in mind. Or you may decide that the house already works just fine once the holiday decorations are packed away. 

Either conclusion can be useful. 

If you’re running out of space or your home no longer fits the way you live, it’s natural to wonder whether it’s time to move. 

But a new house comes with its own financial considerations, from the purchase price and mortgage to moving expenses and potential updates after you arrive. 

If you already like your location, neighbors, schools, commute or other things that can’t easily be renovated, it may be worth comparing the cost and benefits of improving your existing home with those of buying another one. 

There’s no universal answer. Sometimes moving really is the better choice. Sometimes a thoughtful renovation can turn an almost-right house into one that works for years to come. 

Your home may be one of your largest financial assets, so decisions about using its equity deserve more consideration than a holiday wish list. 

A First State Bank Mortgage Loan Officer can help you look at your current mortgage, your goals and the financing options that may be available to you. Whether a cash-out refinance, HELOC or simply keeping your existing mortgage makes the most sense, understanding the differences can help you make a more informed decision.