Homes need updating. Aside from the cosmetics of tiles and paint colors, there are the basic, but necessary renovations that need to be taken care of as well.
From re-shingling a roof to weather-proofing your windows, major home improvement projects are a part of home ownership. Unfortunately, they’re also costly and there isn’t always room in the family budget for a full overhaul of the heating and ventilation system. That’s where home improvement financing comes in. Home improvement financing allows homeowners to borrow money. Sometimes the house itself is used as equity and in other situations, little to no equity is required. Keep reading to learn about the different types of home improvement project financing.
Home Equity Loan
The terms for any loan, including a home improvement or renovation financing loan, will vary depending on the borrower. If you have good credit, your mortgage is paid off and you’re willing to put your house forward as equity, then you can expect to get great rates payable over a period of months or years. You could even opt for a second mortgage, which will get you rates close to prime. However, while a home equity loan obtains for you a lump sum up front, remember that you’ll start paying interest on that entire sum right away.
Line of Credit
One of the easiest ways to borrow money is through a home equity line of credit. A line of credit allows you to only borrow as you need, therefore only paying interest on what you use. The rates, if your credit is good, are great and they’re often approved fairly quickly and painlessly.
Remodeling or Home Improvement Loan
Many banks offer remodeling or renovation-specific loan programs. These work by combining a construction loan with a mortgage and are based on the projected value of the home after you complete your project. You will most likely have to submit a building plan as well as a breakdown of all your project expenses. The bank then usually releases the money in increments, as the project progresses.
If your credit isn’t as good or you’re still building it, you may opt for a small amount of financing that will let you complete the project without being overwhelmed by debt. An example of this might even be store credit from a local store – just enough to purchase a new furnace or the materials you need to retile your floors.