Home Improvement Loan – Hone A New Look To Your Home
Many home owners plan renovations to their homes that cover all types of improvements and repairs. Some can pay for these renovations themselves, while others will apply for a home improvement loan to add a new look to their homes. Renovations can be expensive and depending on what your plans are you may need to consider a home improvement loan to pay for upgrades such as new flooring, a new roof, a new kitchen with new appliances and cupboards, and changes to your bathroom or updates to the patio and the landscaping around your home. These are the most popular changes that consumers make and they are also the most expensive, even for those few that are able to do the work themselves. Sometimes major repairs are needed such as a new furnace or new air conditioning which can also be very expensive.
Fortunately there are many lenders who are willing to lend consumers home improvement loans, however they often have specific requirements of these consumers that sometimes makes it difficult for prospective clients to actually get a loan. The best rates are often with lenders that are willing to provide what are called home equity loans. These are loans that are really a new or upgraded mortgage on your home. Your home’s equity is security on the loan. If you do not pay your payments, they have the right to place a lien on your home so that they can recover their money when the home is sold. Many consumers will combine their existing mortgage with the additional funds they need for renovations into a new mortgage. This can be an excellent method to finance home improvements at low interest rates and low payments.
Some homeowners will also consider a line of credit mortgage on their homes. This is also a registered mortgage that allows the home owner to draw on the mortgage whenever they need it up to an approved maximum. They can also repay the mortgage anytime they wish as long as they pay the minimum payment each month which often is the total interest calculated for the past month. A line of credit mortgage can be a useful tool as a home improvement loan since the homeowner only borrows the money when they need it. Renovations are not all completed at the same time which makes this kind of mortgage ideal for them.
A word of caution is order which we would like to mention to consumers who might be considering this type of mortgage. It takes a great deal of self control and money management skills to manage such a mortgage. If you are not able to manage this type of mortgage you can quickly find that the mortgage is max’d out to the maximum and you have no unused equity left.
You need to have a good credit rating, with no history of missing payments etc to qualify for these loans. If you do and you have sufficient unused equity in your home, chances are that the interest rate, the term and the mortgage amount you are looking for will be approved. Some higher risk clients may still qualify but they will pay a higher interest rate. With a line of credit, you only pay interest on the amount of money that you actually have borrowed.
If you do not have sufficient equity in your home to remortgage your home, consumers will be faced with applying for a personal home improvement loan. These are loans that are typically unsecured, have higher interest rates to reflect the higher risk and clients must have excellent credit ratings. While it may be more difficult to find these types of loans, they are still available and consumers can still make the improvements they want to. Monthly payments are usually higher since the term of the loan will be much shorter than a traditional mortgage will be.
Finally if you cannot qualify for a home improvement loan to fix up your home, many people will just stage the improvements over several years to spread the cost and pay for the renovations themselves. Home owners must save the money they need to pay for the upgrades or use their credit cards to pay for the improvements. Credit cards carry a much higher interest rate on any unpaid balance and consumers are urged to either not spend the money on these upgrades until they have saved sufficient money or apply for a home improvement loan. While this is not the preferred approach for many, it is a viable solution to avoid applying for a home improvement loan.
There are many lenders that are willing to consider all kinds of loan applications and there are brokers who will shop your application for a home improvement loan to these lenders. Brokers get paid by bringing business to lenders and prequalifying the client for the loan or the home improvement mortgage.
If you have tried your loan officer at your bank, don’t give up, there may be other lenders that are more than willing to take you on as a client. This is where a broker can really save you a lot of time by doing the research and prequalification that is needed by many lenders. Save yourself some time and use a broker. They may also be able to find a more competitive interest rate and terms that you current lender is willing to offer you.
The other big advantage of home improvement is that it also improves the value of your home. When you are making improvements always make them with the idea that you may want to sell the home at some point. Changes and upgrades should always appeal to as many potential buyers as possible. While you may not plan to sell in the next few years, any changes that you make should always increase the overall value of your home so you can obtain the highest price when you do decide to sell.
We have covered a lot of ground in this post about home improvement loans and bringing a new look to your home. Focus on obtaining the lowest interest rate with the best terms and conditions you can find to minimize your overall cost. Use a broker to help you find the best home improvement loan available.