Understand Your Finances
How your home's equity could pay for your dream backyard
Let's face it: The best place to enjoy nature is your own backyard.
"In your backyard, you can enjoy the same type of events like dining or lounging around a fireplace, but we can do it on a patio or around a fire pit," says John Doyle, a design expert who focuses on creating intimate spaces that feel like extensions of the home, yet celebrate the outdoors.
If you're thinking about upgrading your backyard, you're not alone. According to the recent Chase Housing Confidence Index, a survey which used data from the US Housing Confidence Survey, millennial homeowners ranked landscaping first on their renovation wish list, ahead of bathroom and kitchen remodels.
"Everyone wants that Instagram-worthy curb-appeal," says Amy Bonitatibus, chief marketing officer for Chase Home Lending. "Over 40 percent of young homeowners are looking to install new landscaping in the next few years."
Paying for the backyard of your dreams
On average, the respondents who were looking to renovate a space in their home planned to spend $20,000. But these renovations don't have to be out of reach financially: your home's equity could be the key to making them a reality. Sixty percent of respondents planned to pursue financing to complete their plans, and more than one-third planned to do so in the next three to six months.
Neema Azimzadeh, a Chase Home Lending Advisor, says that homeowners can obtain funding for a backyard remodel through a cash-out property refinance or a home equity line of credit (HELOC). Here are some features of both to help you determine the best option for funding your dream outdoor space.
Cash-out refinancing: Consistent payments
A cash-out refinance accesses the equity in your property and functions like a typical conventional mortgage. Terms range from 10 to 30 years, and the loan has a fixed rate and fixed monthly payment.
Homeowners who plan to pay off their loans quickly might also consider an adjustable-rate mortgage (ARM). These loans have a fixed rate for the first five to seven years, then rates adjust annually until the loan is paid off. With solid planning, homeowners can take advantage of the ARM's lower rates and payments during the fixed-rate period. Then, you can pay it off before rates begin rising.
Cash-out refinancing doesn't carry pre-payment penalties or early closure fees, which makes a quick payoff even more attractive. Qualified homeowners can get pre-qualified within an hour and can close within 45 to 60 days after their initial application.
HELOC: Freedom and flexibility
Like a cash-out refinance, a HELOC draws from the equity in your home. However, it is even more flexible, offering a revolving line of credit that homeowners can access up to 10 years, with a 20-year repayment period. "It functions like a low-interest credit card attached to your home," Azimzadeh says. And, like a credit card, homeowners can be approved for a specific loan limit, but only pay interest on the funds that they withdraw.
Rates are variable, but homeowners can choose to lock in a rate for a specific term. "For example, if you have a $100,000 limit, you can move $50,000 to a locked rate over however many years and you would still have $50,000 available to use," Azimzadeh explains. "We don't charge for locked rates but there is a cancellation fee if you decide to go back to a variable rate prior to your lock period ending."
Like cash-out refinancing, HELOCs don't carry fees for pre-payment or early closure, which encourages homeowners to pay them off quickly. Approval is quick, and closing takes place within 30 to 45 days.
With quick approval and flexible terms, cash-out refinancing and HELOCs could be just the thing to make your dream summer soiree or perfect fall picnic a reality. And, with warm weather on the radar for the next few months in most of the country—and year-round in some places—it's not too late to start an outdoor remodel you can enjoy this year.
All home lending products are subject to credit and property approval. Rates, program terms and conditions are subject to change without notice. Not all products are available in all states or for all amounts. Other restrictions and limitations apply.
Shannon Shelton Miller is a Chase News contributor. Her work has appeared in the Detroit Free Press and Huffington Post, among other media outlets.