Are you finding that it’s time to update your home? Do the kids need more room as they grow? Is your garage full of stuff instead of providing space to park your cars? Is it time to update your windows or repair your roof?
Problem is, all of these projects require money, whether you hire a contractor or do it yourself. Before jumping into a loan, be sure to look closely at all of the financing options available. When considering a home improvement loan, be sure to ask yourself a few questions:
How long will the job take to complete?
What is the total cost of the job, start to finish?
Are there any other things outside of home improvement that money will be needed for?
Using a credit card is likely the best option for small jobs under $500. It will most likely require a higher interest rate than a loan, but no appraisals or extra paperwork will be required.
Another option is using a home equity loan. This is a low cost way to use the value of your home to pay for home improvements. Low to moderate income families benefit most from home equity loans because they offer a better rate structure over other band loans. The interest paid through home equity loans can also be deducted on your federal income taxes.
What is a home equity loan? It is basically using your home as collateral to borrow money. If you have poor credit or need to borrow a large amount of money, a home equity loan can be your best option. Since it is considered a relatively safe loan, the lender is generally more willing to give it. If you default on your home equity loan, they can take your home away. That in itself usually makes payments a priority to the home owner.
There are many reasons that a home equity loan can be attractive.
The rate of interest is usually lower
It’s easier to qualify for it, even for those with bad credit.
Interest payments may be tax deductible.
You can typically borrow a greater amount of money since they are “safe”.
A home equity loan can also be a good investment for the average consumer. Let’s say the equity in your home is $40,000. You decide to take out a home equity loan for $40,000 for a room addition, roof repairs, and a new screened in porch. You have now improved the value of your home by doing these projects!
Consumers need to mindful, though, that home equity loans are often offered with variable interest rates. That means that the payments can fluctuate and increase. A fixed rate loan is much better, especially if interest rates are on the rise, but it’s likely you will need to ask specifically for one.
Make sure that a home equity loan is the best fit for your needs. Also, be sure to make a budget prior to getting an equity loan to ensure the payments won’t overburden you. You may want to additionally consider insurance to cover the payments in case of any unforeseen events arise causing you financial problems.
Once you decide to make home improvements, be sure to look at all of the available options to ensure you get the best financing option available for you. Be certain, though, that a home equity loan is a great option for your home improvement needs.
Comments Off on Home Equity Loans for Home Improvement