As they venture into homeownership for the first time, many millennials are turning to refinance loans to fund remodeling and renovations. Refinancing can be an attractive option as it allows homeowners to access a large sum of cash quickly and easily and at lower interest rates if they have a good credit score.
Refinance loans are a form of mortgage that allow a homeowner to borrow against the equity in their home to access a lump sum of cash. Commonly used by millennials for renovations, these loans can be used for a variety of purposes such as debt consolidation, home purchases, or to buy out a partner’s interest in a property.
The process of obtaining a refinance loan is relatively simple. The borrower completes an application with their lender detailing the desired loan amount and desired term length. After a loan-to-value (LTV) ratio is determined by assessing the total amount of the loan and the amount of equity available, the lender can decide whether or not to approve the loan. Homeowners need to have at least 20% equity in their home before being eligible for a refinance loan.
Refinance loans can be beneficial in various ways. They offer fixed rates, meaning the monthly rate remains the same throughout the term of the loan, which can help streamline budgeting. Additionally, if interest rates are lower than when the original loan was taken out, the borrower may be able to save money on their monthly payments. Furthermore, unlike other types of secured loans, such as home equity loans, refinance loans offer competitive rates and terms.
Millennials are taking full advantage of the benefits offered by refinance loans. With the housing market being so competitive, many are looking to make their homes stand-out from the rest. Upgrading the kitchen or bathroom might seem out of reach when it comes to cost, but with a refinance loan, homeowners can improve their living space without the hefty price tag.
Overall, refinance loans offer a great way for millennials to invest in their home with minimal risk and hassle. The process is easy and straightforward, and since the majority of millennials are first-time homebuyers, they are particularly well-suited to take advantage of the benefits that refinancing offers. By using a refinance loan to remodel, millennials can create a customized living space that suits their lifestyle and helps them stand out in the highly competitive housing market.
Millennials, aged between 1981-1996, are now the largest group of homebuyers in the US, according to the National Association of Realtors. With this in mind, many millennials are turning to refinance loans to fund remodeling and renovations as they venture into homeownership for the first time; refinance loans offer a prime opportunity for those with a decent credit rating to access a large sum of cash at lower interest rates, often with more favorable terms than other types of secured loans.
In order to secure a refinance loan, borrowers are expected to complete an application with their lender, specifying the desired loan amount and term length; in turn, the lender assesses the loan-to-value (LTV) ratio — the total of the loan compared to the amount of equity available — to decide whether the loan should be approved. It's typically required that the applicant has at least 20% equity in their home before they are eligible for a refinance loan.
Refinance loans offer a number of benefits, such as fixed rates which ensure the same monthly payment throughout the loan’s duration and potentially lower rates if current interest rates are lower than when the original loan was taken out. These features are especially attractive to millennials, who are often first time homebuyers and need to carefully manage their budget.
Moreover, refinance loans are increasingly being used by millennials to upgrade their homes; in a highly competitive housing market, improving the kitchen and bathroom might seem expensive, but with a refinance loan, these improvements can be achieved without having to spend an exorbitant amount of money.
Refinance loans give millennials the opportunity to customize their living space so it fits their lifestyle while also making their home more appealing in the housing market, all without taking on too much risk or hassle. This type of loan provides a great solution for millennials and first time homebuyers, allowing them to access funds for remodeling and upgrading without breaking the bank.
This article was contributed on Oct 31, 2023
