If you have been living in an outdated home for a handful of years and you have put a dent in the amount owed, you may be able to use some of the equity to make changes. Homeowners who put 20 percent down to avoid PMI, pay their mortgage on time, and put some extra down when they get a chance often find themselves paying off their home quickly.

Talk with the bank you are currently using and explore other lenders to see if a home renovation loan is an option for you. If you are putting the money back into the house to make improvements, this can be one of the smartest investments you ever make.

Get Estimates for Renovations

You want to get estimates for the projects you want to do to update the space. Get estimates from the contractors and have a breakdown of the material costs. The bank may want to see these quotes when they inquire why you want the loan.

Renovations that improve the value of your home a great deal include kitchen and bathroom updates, along with structural enhancements like a new roof or HVAC system. Make sure to use the money on items that need the most attention.

Find Out How Much You Can Barrow

The bank will look at a few different things to determine how much money you can borrow on the home refinance, including these factors:

• Current home appraisal
• Equity in the current home loan
• Your salary
• Mortgage payment history
• Credit report and FICO score

If you have a lot of equity in the house, your salary has increased since you took out your home loan, the home value has increased, and you have been making your payments on time, you should be able to get approved.

Look at Rates and Refinance Terms

There are many options for refinancing. If you want to pay off the home quickly, you can refinance and go with a bi-monthly or 15-year loan program. Spreading the payments out over 30 years may even lower your payment when you refinance, even if you borrow money from the equity. Compare the interest rate and know what you're getting into before you commit.

Once you make the changes to your home, you want to get it appraised. You may have an even greater amount of equity because you have improved the home value by updating the property and making changes. Fix up your outdated home with a home refinance loan today so you can enjoy your home in the future.