Renovation help! Should I take a Equity Loan, HELOC, or other

[Babek Sandhar]

Hey BP,

I would love input on what you guys would do in my situation. 

My mom bought a house and we were thinking of renovating the house so we can refinance and buy another property. We bought the house in 1997 for 250k and have about 100k left to pay on the mortgage (including a previous equity loan [about 8k left on that]). My mother is semi-retired, and I am about to graduate college and start working in August time (I will also be taking over most of the mortgage). We live in San Jose, CA and the redfin estimate of the house is about 1 million (I understand this is not the most accurate pricing, but it gives you a general idea what the house is worth).

What we are considering is taking out another Home Equity Loan to renovate the house and add an attachment (450-499 sqr ft.). We figure that our renovation should cost us somewhere between 50-100k. I also know that my mother is eligible for a HARP loan, although I'm not too sure how exactly those work. We have also entertained the idea of a HELOC, but with the interest rates being variable, I believe that if interest rates increase drastically (which I believe will happen over the next few years), that may not be our best option. What would be our best course of action? Thanks!