Financing Options for Home Improvement

It’s exciting and rewarding to undertake home improvement repairs for your house, though affording these projects can be a challenge. Here are different financing options you can explore to get on with your repairs.

Home Equity Line of Credit

A home equity line of credit offers low interest rates for homeowners with accumulated equity. For this financing, you use your house as collateral. This enables you to borrow a specific percentage of the equity amount. Once set up, this money is available to you in an account from which you can borrow. Many consumers may not qualify for these terms due to low equity amounts accrued for mortgages. Approval times can be lengthy and you may need to schedule an inspection to ensure that your house is free of defects.

Short-Term Personal Loan

If you have decent credit and a working relationship with a lender, you might qualify for a short-term personal loan with your credit union or bank. This type of financing can be either secured or unsecured. The term of the loan can range from 24 to 60 months. Generally, interest rates are less than credit card rates, as long as you have solid credit scores. Rates will vary depending on your credit score, the amount of cash you borrow, and the term of the loan.

Cash-Out Refinancing

You might be in a position to execute a cash-out refinance if you’ve successfully made a dent in your mortgage principal balance and your home has gone up in value. This scenario will likely result in higher monthly mortgage payments and lower interest rates, but it will give you the cash you need to pay for home improvement work.

Title I Home Loan

The U.S. Department of Housing and Urban Development insures lenders from potential loss on property improvement loans made to homeowners. To apply, you need a good credit score and your income must be able to cover repayment. You can use this money to pay for repairs, site improvements, and modifications of single-family dwellings. HUD only approves certain lenders so you need to find an approved lender and submit an application. The maximum financing amount for a single-family house is $25,000 and the maximum term allowed is 25 years. Interest rates are fixed, based on common market rates in your area.

Contractor Loan

The company you hire to perform a home improvement project may offer financing packages to help you pay for the work. Before signing any agreements, research the terms of the loan to ensure that the rates and terms are competitive. It’s also important to confirm the source of funding to make sure the contractor isn’t receiving undisclosed kickbacks from a lender.

A little creative financing should help you get your home improvement project underway in no time.

4 Benefits of a Home Equity Loan

Many people consider getting a home equity loan, but are not sure if it is beneficial to them to do so. That is why you need to know about the many advantages to getting this type of loan for your home.

First before learning about the advantages you need to understand exactly what this type of loan is. It is basically the amount that your home is worth on today’s market minus the amount that you still owe on your house to the mortgage lender.

In other words if your home is worth $100,000 and the balance that is left on your loan is $50,000 then your equity would be $50,000 which is the part of your home that you are the owner of free and clear.

Now that you know exactly what this type of loan is you need to know the many advantages to getting this loan. Below are the most important advantages you need to be aware of.

One: With this type of loan any interest that is paid is tax deductible just like your first interest is from the original mortgage loan.

Two: The rate for this loan can be lower than with other types of methods for borrowing money such as credit cards. The reason for this is because you are already using the property so there is a higher guarantee that the loan will be repaid on time.

Three: When you get this loan you will be able to get a much bigger source of money for important purchases that may need to be made. Some of the different purchases can include:

– College education

– Home improvement

– Medical emergency

– Other types of emergencies that may happen

Four: Improve finances – You have the option of consolidating your debts into one monthly payment when you get this type of loan. So you can get your finances back on track this lets you get rid of all the debts that have high interest rates.

One of the disadvantages you need to be aware of before getting this type of loan is that if you don’t make the monthly payments on this new loan you can very easily lose your home. So always be sure that making the payment is not a problem before getting this loan.

Now that you know the advantages of a home equity loan you can take time to decide if this type of loan is worth getting or not. Just don’t rush your decision because this is a huge decision to make. Instead do your homework and talk to your mortgage broker before making your final decision.