If you’re thinking about taking out a home improvement loan, there are several options to consider. First and foremost, your mortgage consultant needs to know why you want a home improvement loan. Here are some factors to take into consideration.•How long have you been in
home? •Will improvements increase property value? •Are you making improvements to increase energy efficiency? •Will improvements be made in one fell swoop, or in stages? •What is current outstanding balance on your mortgage? •What is appraised value of home? •How much will improvements cost? •What improvements will be tax deductible? •Do you have other revolving debt that you would like to pay off at same time? •Are you making improvements because you plan to sell property?
The New Tract Home Blues
Buyers of newly-built homes are often tapped out after making initial down payment and closing costs, including upgrades to amenities and inevitable need for new furniture. Shortly thereafter, they realize they’d like to make additional improvements to really have home of their dreams.
If you’re planning on putting down roots (pardon pun), landscaping may be in order. The developer may have been kind enough to make front yard a perky green, but if back yard is a disturbing brown color sparse with weeds, you may be entertaining vision of a pool or deck.
Look into option of a Home Improvement Loan with a fixed interest rate as a 2nd Trust Deed. This type of loan does not require you to have equity built up in existing mortgage. The maximum loan amount could go as high as 125% of current appraised value of home, and you can make improvements yourself or go extra mile and hire a contractor if job requires architectural design, permits and inspections.
The Major Overhaul
If you have built up equity in your home and are geared up for some major renovation, Home Equity Line of Credit (HELOC) is probably your best bet. This adjustable loan allows you to use your equity as a line of credit, so if you have improvements that are phased in over time you can simply write a check when you need to pay a bill.
It’s like a having a credit card with a much lower financing rate. In fact, HELOC can be used for any reason at all – even paying off that credit card debt. In most cases, this action turns that revolving debt payment into a tax deductible payment with a lower interest rate. The HELOC is generally a 2nd Trust Deed, unless it is used to pay off and replace 1st Trust Deed.
