A construction loan is an alternative to HELOC for borrowers who don’t want to use or don’t have equity, and this type of financing can be used for construction on an existing dwelling. The lender will ask a lot more questions about what borrower wants to do with money, and home owner will need architectural designs, permits and a licensed general contractor on board.

Construction loans are short-term loans that usually require interest-only payments until completion of construction, but balance is due when construction is done. Most often, that is managed up front by setting up construction-to-perm financing. In this scenario, loan is automatically rolled over into permanent financing at a fixed rate when construction is complete, and a rate-lock agreement can be purchased to carry borrower through that period of construction.

Another option – depending on value of your home and local loan amount limitations – is FHA 203(k) Program. This financing is designed for purchase or refinance and rehabilitation of properties that meet FHA guidelines. This is worth looking into if you need to bring a property up to compliance standards, finance eligible energy efficient improvements, or turn a single-family owner occupied dwelling into a duplex to accommodate Mom or Dad!

Just a Facelift, Please!

If you want to sell your home and you simply want to improve curb appeal, it makes sense to go with a HELOC. Make sure you are aware of current market value of homes in your area to make sure you’re not going over limit on fair market value of your home. You’ll want to get a return on your investment!

If you’ve had your home on market too long and have not been able to sell, you might want to make some changes to give it a fresh new look and bring back passion you once had for your home. Your mortgage consultant will help you weigh out your options for financing based on your outstanding mortgage balance, income and credit score.

Regardless of your reason for home improvement, make sure you share your goals with your mortgage consultant. He or she can walk you through various loan options and confer with your tax advisor to make sure you’re getting best deal possible.

There are two main types of equity loans you can get on your house. A home equity loan is a lump sum payment equal to a percentage of money you have paid into your home. A home equity line of credit is different and works more like a credit card, where you borrow only money you need from your home equity.

Equity loans have to be paid back, usually on a monthly basis. This includes principal payment plus interest for month. If you do not pay on time, you can end up ruining your credit and be forced to pay a higher loan rate on any credit you apply for. On other hand, timely payments can help you raise your credit score so you are able to refinance your equity loans and secure even lower interest rates.