A mortgage loan is an excellent way to buy a home, something many of us dream of. You are committing yourself to regular monthly payments throughout the duration and paying back more than you take, but it’s worth it. After all, living under your own roof rent-free is why you do it.
Many people have found themselves able to pay off the mortgage long before the “end date”. Whether they’ve been saving money, won the lottery, or got an inheritance, ending your commitment to the lender is the day many people await.
Let’s say you’re in this situation and want to pay off the mortgage. This raises another question – what about renovations? You can either continue paying off the mortgage and renovate your home or pay off the mortgage and be debt-free. Which is the better option and why?
For the sake of this guide, we’ll consider that you have enough money to either cover the mortgage or fully renovate your home.
When to Choose the Renovation?
Renovating a home offers many advantages, even when looking at it from multiple aspects. Your home may be older and out of shape, or you want a fresh look; renovating can help deliver that.
If you’re considering this as a rental property, renovating it can make more sense. Improving the look and functionality will make it more attractive, and you’ll also be able to increase the rent. When you look at it from this perspective, the rent will go up while the monthly payment on the mortgage remains the same. The result is more money for you each month.
Some people consider their property a capital investment. Renovating a home increases its value, so it can be a good idea in the long run. Remember that despite the mortgage, you can still sell it now, but if you renovate it, the asking price will be higher.
Renovating is also a choice, not a necessity. If you have the money and you’re able to make regular monthly mortgage payments, then why not proceed with the renovations? You’ll be happier at home and have no regrets about not investing the money in the mortgage.
When to Choose the Mortgage?
Being in debt is a scary thought, which is why many people consider paying off their mortgage. However, it’s not just about the thought. There are also some advantages to this approach.
Being able to pay off the mortgage beforehand means you’ll pay less than anticipated initially. When signing the mortgage, you get an outline of your monthly payments, and you can see the amount of money you get and the amount you’ll need to return. People who return the money sooner are rewarded by not paying full interest.
Another reason you may want to consider paying off the mortgage is the interest rates. They fluctuate, and if you have a mortgage with adjustable rates, you could be in a situation where they’re much higher than they were when you got the loan. Rather than going for a refinance option, you can pay off the mortgage and not worry about it anymore.
That said, you can still renovate if you’re willing to consider some of the available renovation loans.
Which Option to Choose?
Deciding which option to choose is tricky, especially when considering each situation is unique. There are many reasons why you should go for one or the other. But they all depend on you. In a worst-case scenario, companies like f5mortgage.com and many others will provide you with professional advice on which option would work better for you.
If you’re willing to decide for yourself, here are a few things to consider. Leaning towards the renovation side is a recommendation if your home really needs to be renovated. Not just making the interior look nice and getting new furniture. Renovation in terms of replacing or fixing key parts of the home such as windows, doors, roof, plumbing, etc. Over time, these items are worn, and they don’t do their job as they did when they were new.
For example, older windows, especially wooden ones, won’t seal as well as the new ones. As a result, your AC will work more to keep the temperature normal, leaving you with a higher electricity bill. Then, there are crucial safety aspects like electrical or plumbing work, as well as a leaky roof. You shouldn’t ignore all of these and start the renovation process. The bonus here is that they’ll increase the property value.
On the other hand, you have the mortgage side of the story. As mentioned, you can always pay off the loan and get another one for renovations. It’s not the worst idea if the new loan doesn’t come with higher interest rates.
Both choices can be right or wrong. Assess the situation, check your finances, and consider this before making a decision.
