Learn how to finance your home improvement projects

By admin On February 4, 2010 Under home improvement, home loans

Choosing an appropriate home improvement financing plan has a lot to do with the kind of home renovation plan you have in mind and how much you’d like to invest in the project. It is commonplace that if you want to extend the repayment terms, you have to shell out more as the interest rate increases, but the flip side is the monthly repayment fees will be less. So make sure you choose the right home financing plan that is easy on your budget. Here are some sources of home improvement financing:

1. Home equity loans: These involve borrowing against the equity in your home. You can get a fixed sum of money to fund your renovation project. It is good to go for a fixed rate because it makes repaying the loan much easier. If you are not able to make the payment, you may risk losing your home.
2. Home Equity Line of Credit: This type of loan is about giving the borrower an open line of credit. Home Equity Line of Credit does not normally have a fixed rate, so the interest rate is dependent on market conditions.
3. Home Improvement Mortgage Refinance: You can choose to refinance your mortgage at a fixed rate. This makes it easy to utilize the extra money for the renovation project. Depending on the term of your mortgage, you can choose to repay across a span of 20 to 30 years
4. Secured Loan: A secured loan is a loan that takes advantage of the borrower’s assets to make sure that he or she is able to repay the loan. This means, due to the collateral factor wherein your money is secured against a vehicle or a house, the lender has the peace of mind to get his money, if you are not in a position to make the payment
5. Unsecured loan: Unsecured loans, also known as personal loans, are loans that are not secured against any collateral, but against your credit rating. If you are making use of home improvement finance for small project, you can use the unsecured loan. You can get a personal loan from a lender or a bank. The interest rate can fluctuate according to market conditions.
6. Banks loans: You can take bank loans to fund small renovation projects as they have to be paid relatively quickly, in a matter of few years.. It is better to go for a fixed rate loan so that the interest rate is not dependent on market fluctuations

It is important to make sure that you are in a financial position to make the repayments. Prepare a list of monthly expenses including mortgage so that you have no speck of doubt about the inability to pay the loan. Find out the amount of money, you can pay every month. To come to the final costs that you have to pay, add up all the costs that are connected to the home renovation, do not overlook any single thing. When it comes to choosing a lender, do comparison shopping. Go online and find out competing lenders, and choose the one who gives a better deal. Also, make sure that you choose a reputable lender with good credibility in the market. Go through the fine print of the document of the lender so that you are aware of everything in the contract. Researching is the key to find a home improvement finance resource who will not only give you best terms but also help in building your home the way you want.

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