Originally Answered: Where does the money come from to rebuild a house?
Typically, there are two ways to do this:
1. People take some equity out of their houses by refinancing their mortgages
2. Use a line of credit on the house (which essentially is another loan)
In Scenario 1, as an example, if you purchased a home for $100K and a few years later the house goes up in value to $300K, then you've built up $200K in equity.
Some people take advantage of this by taking some of the equity out by refinancing -- restructuring your mortage. Let's say you want to remodel and need $50K. You refinance your mortage from $100K to $150K. Now, you owe $50K more but you also take $50K out as money in your pocket. You can use this to remodel your house.
Of course, you can take even more money out based on what you think you can handle in terms of monthly mortgage payment. However, if you take too much out, then you're eating into your equity, and you may not want to do this to give yourself some cushion.
Please note that I'm not taking fees and points into account in this scenario (or any other).
In Scenario 2, taking a line of credit (much like 2nd mortgage) against the house is like getting a very flexible loan, where you can take as much or little out of your line of credit for your use (e.g., fixing up the house), up to the limit of the line of credit. You repay this back based on the terms of the loan. The total amount varies depending on the value of your house. However, the interest on the line of credit is typically adjustable.
Please note that this means that whatever the interest rate, your payment fluctuates with it.
This is a good idea if you don't have much equity on the house and if the interest rate is low.
However, I don't personally like this because you don't know what'll happen with the interest rate.
I'm not sure if $98K number you provided for the value of your house is based on an appraisal. If so, the value of the house is less than the amount you owe. This means that unfortunately you won't be able to take more money out of the house. However, if you meant $98K is the balance on the $150K, then you may want to check with an appraiser (if you don't want to pay someone, check www.zillow.com for a very, very rough estimate).
Please do note again that you need to do your homework and figure out what you can handle in terms of mortgage payment to ensure you don't get into financial trouble with refinancing, line or credit, or remodeling expense.