Can I Borrow Extra On My Mortgage for Furniture
Buying your first home can drain your bank account when you factor in the down payment and closing costs. The home buying process can leave you with little remaining to buy furniture or any other finishing touches needed to make it your home.
It is possible to creatively borrow extra on your mortgage for furniture whether you are purchasing or refinancing.
Is it Smart to Include Furniture In your Mortgage?
The question of whether it is smart to include furniture in your mortgage is something that you or your financial advisor should determine.
You may be willing to finance furniture in your mortgage for the next 10-30 years, but is it smart? Many financial experts would say it does not make sense to pay mortgage interest long term for furniture because unlike your home, the furniture will not appreciate in value. The idea is similar to financing a car which also loses value quickly.
Meanwhile, if the alternative is financing the furniture on a high interest credit card, then including it in a lower interest mortgage payment is a better way to go.
The best move is to come up with another way to purchase the furniture without financing or with zero interest included in your payments.
How to Borrow Extra on Your Mortgage for Furniture
There are multiple ways to include funds to buy furniture into your mortgage. Below we will take you through your options depending upon whether you are purchasing or refinancing your home.
1.Cash Out Refinance
If you already own your home and want to borrow extra on your mortgage for furniture, you can get a cash out refinance and use the funds to purchase the furniture.
Something to consider is you are also going to have closing costs with this mortgage. Therefore, not only are you going to pay interest on the money used to buy the furniture, but you are also going to pay thousands in closing costs.
A cash out refinance makes sense when your interest rate on your new mortgage will be lower than what you have now. Then, there is an additional benefit and savings which will offset the cost of refinancing.
2.Purchase with a Smaller Down Payment
Consider making your purchase with a smaller down payment and use some of the down payment money to buy furniture.
You do not have to put 20% down when you buy a home and you can always go with an FHA loan with just 3.5% down. That would free up the additional money needed to make your furniture purchases.
Keep in mind that you may have PMI when buying a home with a smaller down payment which means you really need to look at the cost benefit analysis.
3.Ask for a Seller credit
Seller credits are permitted with most mortgage programs where the seller provides a credit to cover the buyers’ closing costs. In this situation, you can use the money you would have spent on some of your closing costs to purchase furniture.
If the seller is unwilling to provide a credit initially, then offer to pay more for the home in exchange for the credit. Doing this will increase the loan amount which means you just successfully borrowed extra on your mortgage to cover the cost of furniture.
4.Negotiate to Purchase the Home Furnished
The other option that involves a seller negotiation is to ask the seller to include the furniture in the sale. First, you have to actually like their furniture but also you can expect the seller to ask for a higher sales price.
This will also lead to a larger loan amount and the cost of the furniture is now added to your mortgage.
5.Ask for a Lender credit
Lenders are able to offer what is called a lender credit which is typically used to cover closing costs. If your lender is able to provide you with a closing cost lender credit, you can then use your closing cost money to buy furniture.
Please note the lender credit is usually offered in exchange for a higher interest rate. This means you are paying a higher rate on your entire mortgage balance to have your home furnished.
Borrowing extra on Your Mortgage for Furniture Pros and Cons
Pros
-
- You get to enjoy a furnished home soon after moving in
- It leaves you with more cash reserves
- The mortgage rate is likely lower than interest you will pay at a furniture store
Cons
-
- Your monthly payments may be higher
- You will pay much more in interest over time
- You may have PMI if your down payment is less than 20%
How Soon After Closing Can I Buy Furniture?
You can buy furniture immediately after closing on the purchase of your home. What you must not do is purchase the furniture on your credit card before the closing date. Your lender may pull credit again right before closing and if you have more debt, your loan could be denied.
Will Furniture Increase Home Value?
Furniture in itself does not add any value to a home unless you plan to sell the home furnished. However, if you have furnished your home elegantly, it may elevate the perceived value when potential home buyers are touring the home. Therefore, the furniture could yield a higher sales price.