Dreaming about a sunroom to add light and livable space in your home, but you’re not sure if you can afford it? Paying for your new sunroom may be easier than you imagine. Investing in your home builds the property value, especially for projects that increase the size. Adding a sunroom will improve the usable space in your home for family now, bring more light into your home, and let you take advantage of the outdoors without worrying about the weather. So how do you afford it?
The cost of adding a sunroom is typically lower than the cost of building a traditional addition or outbuilding. You’re already making a smart investment by choosing a sunroom. Of course several variables affect the cost including location, labor, materials, and size. You can work with your sunroom dealer to make affordable design choices to stay in budget. Financing for your dream sunroom is available in a range of options. Keep in mind that there is not one solution for every homeowner. Evaluate your financial situation to determine the best solution for financing your new sunroom.
Leverage Your Home Equity to Pay for Your Sunroom
Exploring financing options using existing home equity could be the ideal way to pay for the new sunroom. As a homeowner, you have worked hard to build equity in your property. You can turn that equity into a financial solution for the cost of the sunroom while increasing the value of the property. The best option for financing your sunroom project utilizing home equity will depend on several factors. Your financial situation, credit score, current interest rates, and your evaluation of the lending options should be considered before making a decision.
Mortgage Refinance
Building your sunroom could be a chance to look for the best new home loan available to you. Refinancing your current mortgage gives you an opportunity to pay off a high interest loan with a lower interest new loan. Since the new loan would only be for the amount of principal remaining on your current loan, your monthly payment will be lower. Having more available cash every month to save or invest can help you pay for your sunroom. This is a great option if you prefer to avoid paying interest by saving and paying cash for your new sunroom.
Mortgage refinance is not always the best option. Saving money to pay for your sunroom may take several months, and current lending conditions may not be favorable. If this doesn’t sound like the best fit for you, don’t worry. There are other options that take advantage of the equity you have already built in your home.
Cash-out Refinancing
Long-time homeowners often build a sunroom to increase the livable space as their family grows and changes. If you have enough equity in your home, you may be able to refinance and get cash for the new sunroom at the same time. A cash-out refinance loan exchanges most of the equity established in the home for cash to build the sunroom. This type of financing will replace the current mortgage with a new mortgage. The new lender pays off the current mortgage balance, and gives the homeowner a check for a portion of the existing home equity.
There are advantages and disadvantages of a cash-out refinance. Current interest rates and other factors should be considered before deciding on this type of financing for your sunroom. This type of loan is usually a thirty-year mortgage which, statistically, increases chances of foreclosure. The best use of this type of loan is to increase the value of your property. Since a sunroom increases the livable space of your property, it is the type of investment that makes the best use of cash-out refinancing.
Home Equity Loan
Home equity loans give homeowners a lump sum of cash for improvements like your sunroom. The amount a homeowner can borrow is determined by credit score, difference between what is owed and the current value of the home, and a cap that is set by the lender. A home equity loan is a second loan on your home. This loan may have a higher interest rate than other home equity loan options, but it would be a good fit if the current mortgage has a low interest rate.
Home Equity Line Of Credit (HELOC)
Some homeowners prefer to have flexibility in financing for projects. On occasion, homeowners find that the budget for materials or unknowns will push expenses for projects above the anticipated cost. Adding a sunroom patio enclosure, for example, may inspire a desire for new matching deck railings. If you expect that you will have additional projects over the next ten years, a home equity line of credit (HELOC) might be the financing option for you. A HELOC uses current home equity as security for a loan, but it is not the same as a home equity loan.
A HELOC has a draw period, often for ten years, during which a homeowner can borrow for projects like a sunroom with minimum payments. At the end of the draw period, the homeowner pays back the loan over time. HELOCs are a potential financing option if you know you will have additional expensive home projects and repairs.
Alternative financing options
There are other financing options available if using home equity is not right for you. Personal loans are an alternative financing solution if you do not want to use your home as collateral or do not have enough equity to take advantage of those options. Because a personal loan is not secured by the home, the interest may be higher and the payback period may be shorter.
Combining financial strategies may also be an option to consider. Getting a loan for a portion of the cost, and using a HELOC or credit card for the remaining balance could have benefits in some situations. Credit cards could be utilized to cover a portion of the sunroom project or pay for any unexpected costs. Credit card interest is generally high, however, you can take advantage of card rewards and pay the balance quickly to avoid paying too much interest.
Global Solarium Dealers Are Your Advocates
Our experienced professional dealers can walk you through the process from start to finish. We will help you every step of the way from designing your dream sunroom to getting the finishing touches just right. Contact us today to learn how we can help you have the sunroom of your dreams.