There’s a lot of excitement that comes with buying your home. This includes all the adventures and experiences you will get in this new chapter of your life.
A new home means a new beginning. And, very likely, it also means new furniture! And furniture isn’t exactly cheap these days.
So that leads many to ask the question, can you borrow extra money on your mortgage to finance furniture as well? Read on to find out the answer and why or why not.
Can You Borrow Extra Money On Your Mortgage For Furniture?
Let’s get to the point. You probably can’t do this with a traditional mortgage. However, there is one type of mortgage that does let you do this. The package mortgage.
Besides this there’s another option you can use. It’s a home equity loan (aka a second mortgage). A home equity loan is a type of loan that allows homeowners such as yourself to borrow against the equity in their house.
Let’s take a close look at both these options.
How to Get a Home Equity Loan
To get the loan in a home equity loan, you have to have equity built up in your home. The equity you have in your home is basically the percentage of the home’s value that you own. Or, put another way, it’s the difference between the value of your home and how much you still owe on your mortgage. If your home is worth $250,000 and your still owe $200,000 on your mortgage, your equity is $50,000.
In this case, you can then get a home equity loan for $50,000 that you can use in many ways. Aside from using the money to buy furniture, you can also use money from a home equity loan to pay off other debt you may have, to cover emergency costs or to expand your home through a renovation.
Using the money for things like cars, luxury goods or to invest in the stock market is not recommended.
How to Build Your Home’s Equity
There are a few to build your home’s equity after you move in.
One is through increasing your property value. Usually this is done through remodeling your home or adding an addition to it.
Another is to pay more on your mortgage. You can do this in a big lump sum if you come into some extra money. You can also do this by paying more each month.
You can also split your month mortgage payments in half and pay them every 2 weeks instead of once a month. Not only can this build up your equity, but it will save you a lot on interest and shorten your loan.
Besides the above, time is usually on your side when it comes to building equity in your home. Generally home values rise over time. Any rise in value of your home will boost your equity.
Alternative Ways to Finance your Furniture
An alternative to the home equity loan for financing your furniture is through a package mortgage. A package mortgage is a type of mortgage that finances not only your house, but also the furniture in the house along with other properties found inside.
However, there is one big downside of this type of mortgage. It’s that the lender technically not only owns your home but your furniture too. So if you were ever to want to get rid of some of your furniture, you’d have to get the lender’s approval.
There you have it! We hope that this article has helped you gain an insight on how to borrow extra money from your mortgage for furniture.