REAL ESTATE NEWS

The Benefits for Financing Down Payments and Renovations

Written By: Rebecca Kennedy
Sunday, October 23, 2016

Whether youre a professional property developer or a single homeowner, financing your property ambitions comes above all else. Even professional property developers with a proven system of acquiring and renovating homes, condominiums and business properties can run into financing issues.

Weve examined the benefits of financing a higher down payment, purchasing renovations and the cash financing options available for those of you looking to buy and upgrade your home.

Why Save For a Greater Down Payment?

Banks and lenders want low risk scenarios and that ultimately comes down to meeting the required down payment for your mortgage deal, and theyll give you a better deal if you offer a lower risk scenario. Paying an increased down payment comes with a number of fantastic benefits for your financial future. Heres a few key benefits, according to Investopedia;

Reduced Mortgage Payments - Because youve put more cash up front, your monthly payments will be smaller and more manageable

Lower Interest Rates - Lenders will give you a far improved rate since youre deemed a lower risk. Expect interest rates to lower significantly upon 20 down payment.

No Mortgage Insurance Fees - If you cant afford a significant deposit, most mortgage deals will require you to take out mortgage insurance, which will add another 0.5 - 1 interest on top of your existing deal.

Ability to Ride Out Financial Crises - When it comes to a financial crisis, those in most danger of ruin are the ones who have taken out the maximum loan available on the lowest down payment. They have a high interest rate deal and may even face foreclosure.

Why Save For Renovations?

Renovations and upgrades obviously provide that wonderful ability of allowing you to transform your new home into your own dream living space. But aside from that, they can also allow you to significantly improve your homes resale value. Investopedia strongly advise making wise additions to your home that will ultimately boost your bottom line.

According to US News Money, these are the renovations and replacements that will bring the greatest return on investment;

Renovations that bring the greatest percentage return on investment:

  • Entry door replacement: 96.6
  • Deck addition wood: 87.4
  • Attic bedroom: 84.3
  • Garage door replacement: 83.7
  • Minor kitchen remodel: 82.7

Renovations that yield the smallest return:

  • Home office remodel: 48.9
  • Sunroom addition: 51.7
  • Bathroom addition: 60.1
  • Backup power generation: 67.5
  • Master suite addition: 67.5

Financing Options

So now you understand some of the reasons for actually spending more cash on your home But if you dont have a large disposable income, you may need to find a means of financing your purchases.

Saving - Of course, the glaringly obvious method for saving a down payment isnt so straight forward. Thats especially true if youve got student debt, rental payments and bills to pay, with very little disposable income to go towards your downpayment. The internet is a wonderful place however, and fortunately theres a number of down payment saving strategies to help you

Help from your parents amp; family - Its the go to option for many first time home buyers. Loving parents are willing and often able to give you that extra boost in disposable income necessary to make that all important down payment on your first home. Even if you can agree a repayment plan with them, thats going to be far more favourable than turning to a personal loan for financial assistance.

Personal loans - Theres a number of reasonable options for taking out a personal loan - Peer-to-peer lending platforms, car title loans see how car title loans work and credit cards are just some of your options for accessing cash.

Tap your IRA - Theres an exemption for withdrawing up to 10,000 from your IRA for the purpose funding your first home. Its an initiative you should consider if youve got money built up

Hustle - Whether its getting a second job or selling off your unwanted possessions on Ebay and Craigslist, theres nothing like a bit of hustle to increase your bank balance and put you in a more financially secure situation.

Whatever you decide, ensure that youre in a stable situation to make the commitment of purchasing property. After all, the 2008 financial crash was a stark reminder that the property market can be a fickle one.





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