Home Improvement Finance

Doing a project that improves the quality of your home is a wise decision and a wise investment as well. Not only will it make your home more comfortable and beautiful, it will increase you home’s value as well -that is of course if you plan to sell it. Improving your home will raise neighborhood standards, because of the home improvement; the value of your property goes up. If you ask an economist, these type of improvements mean a lot of things. One is that it will increase the sales for home products and materials needed for home improvement and in effect, you will be helping your community’s economy by improving your home. Home improvements will also yield jobs since you will need a contractor, carpenters, plumbers, etc.

If you want to do some work on your home, there is such a thing as home improvement finance. This is not just a one-time agreement with a finance firm but it will cover future repairs and renovations if in case you will need financing again. This is of course an easy decision to make because year after year, you find things that need to be repaired in your home. Well there is no need to worry because financing for these types of improvements to your home are here to stay, and to assist you in getting those projects started. In fact, you can use home improvement finance to add one more room into your home, put in a bigger pool in your backyard, or for remodeling. You can even use the finance to make your home more energy efficient i.e. installing solar panels to save on electricity.

Financing for household improvements are generally home equity loans that allow you to tap into your home’s equity for cash by applying for household projects or renovations. Getting home improvement finance is better than other types of loans because the rates are lower and offer better terms for you. It gives you the flexibility to pay expenses that are recurring and the best thing about it is that there is no application fee (for at least most of the home improvement finance agencies in the US).

How to Use a Loan for Your Home Improvement Project

Upgrading and renovating your home costs money, and depending on the type of home improvement project, it can cost a lot of money. However, what if that money isn’t there right now and a new roof just doesn’t fit into your budget? That’s where home improvement financing and loans come into play, even if you generally prefer to avoid them.

If you don’t have all the money that you need for your home improvement project, there are ways to borrow it, including a home equity loan, credit line, second mortgage, home improvement loans and short-term credit card solutions.

Most people who want to finance a home improvement project apply to their bank for a home equity loan. Like a mortgage, a home equity loan uses your house as collateral for the loan which is often based on the projected value of the house after the renovations are completed. How much you can borrow will also depend on how much of your first mortgage you have remaining.

Your interest rate for a home equity loan will depend on your credit score, your lender, the value of your equity and the going or prime interest rate. Often for home equity loans that are targeted specifically toward home improvement projects, your lender will ask to see a full plan of your home improvement project along with a budget and estimated timeline. This way, the lender can not only gauge the value of the property after the renovations, but also get a clear grasp of the required budget. Remember, when making your budget, always add a 10-20% buffer to allow for delays, weather problems or unexpectedly higher supply costs.

Another option for smaller projects is a line of credit. A line of credit allows you to only borrow what you need and only pay interest on what you use. For example, if you get a line of credit for $25,000, but only spend $15,000 to renovate your kitchen, then you’ll only need to make payments on that $15,000. With a solid credit rating, a credit line usually offers great interest rates too.

For short-term and small financing needs, many couples use credit cards. And when planning a smaller project or a quick-fix like a refrigerator that needs to be replaced promptly, credit cards can work adequately. However, the interest rates are normally much higher and should only be seen as a short-term solution rather than a means of long-term financing.