Best Home Improvement Options for Financing Best Home Improvement Options for Financing
The best home improvements result in a trendier house and increased living space, while adding to the property value of the house. Remodeling includes a variety of projects generally aimed at customizing the house to your particular needs. Before embarking on home improvement, it is best to draw up a list of what improvements we want to make and how to finance all this.
The few most important things to consider are:
- How much will it cost totally?
- How long it will take to finish the whole work? And who will do the work?
- Are there any other expenses other than for the home improvement?
Home Improvement Finance Options
There are certainly many home improvement finance options available, but it is best to know the minute details about loan terms, including
- Interest rates
- Amount of monthly payments
- Term of the mortgage
- What improvements are covered by the loans
- Whether the interest on the loan is tax deductible
- Whether upfront expenses and other fees can be met as they arise
- Amount of paper work involved
Home Equity Loan
One of the popular options is taking a home equity loan along with original mortgage. This is based on either the equity that is already there or calculated on the increased equity that comes with the improvement. If the interest rates are low and deductible, an equity loan may be a good choice, especially when you need a lump sum at the beginning of the project to get started. If the equity is limited, you may qualify for a Title 1 federal loan.
Setting up a home equity line of credit (HELOC) is a good option if you are planning to stagger the construction or improvement. The money can be drawn as needed and until such time the money is used, no interest is due. HELOCs have mostly variable interest rates.
Refinance the Original Mortgage
Another option is to get the original mortgage refinanced. Once you've owned your house long enough for the property value to have risen, you can borrow a higher amount and take the difference in cash to finance the improvement. The interest rates are lower but up-front costs will be there. A second mortgage is another common choice when there are major changes planned, although you should do careful planning to avoid defaulting.
Retirement plans like 401(k)/403(k) are options that are relatively easy but this cuts into the sum we get on retirement if the loan is not paid back within five years. Tapping the insurance policy is considered to be a safer bet as only interest need be paid yearly though assured amount is less after death.
Other personal loans, state and city home improvement loans, local bank loans are also available options. Issued against stocks or shares, bonds or savings accounts, these may carry a higher interest rate and not tax-deductible.
You will want to discuss your options with a lender at the bank or financial institution to make the final decision on how to finance your home improvement project.