If you’re considering any kind of work on your home, from turning your garage into a gym to a whole new kitchen, usually the only thing standing in your way is money; this is the purpose of a home improvement loan. If you want top-notch home improvement work done with a warranty, you’ll need to hire professional tradesmen who should also speed up the job a lot.
Home improvement loans generally have the option of a loan secured on the property itself or an unsecured loan where the home does not need to be used as equity. When an owner has just bought the house, he can still apply for a loan, subject to his condition, of course. Financing used to improve a home is considered a good investment in property and even if equity in the property is not required, loans can be arranged for up to 15 years at a time.
The primary stipulation when applying for a no-equity loan is the combined income of both homeowners, but the loan amount must not be more than the amount allowed by law in the county where the home is located. Although various details of the applicant are reviewed, these loans are relatively easy to process and there is not a lot of documentation to complete.
When a home improvement loan is arranged that is secured, it means that any residual value in your home is used to help finance the loan. However, there are benefits to arranging for a secured loan, as they typically have a lower interest rate, lower monthly payments, and while relatively hassle-free, are not another mortgage on the property.
Obviously, the amount you can borrow with a secured loan will depend on the value of your home. Although the value of your home is required, it will also take into account how much you owe both on the home and personally.
At this stage, everything is still under negotiation and is only finalized when the applicant agrees to the amount, payments, and conditions. While most loans are based on a fixed percentage of the property’s value, some lenders will agree to finance up to 125 percent of the appraisal.
An equity-based loan can be risky if you are set to lend more than you can comfortably repay, so consider this carefully as you may end up handing your beautiful home over to your creditors. Many people do not take these facts into account when arranging for home improvement loans to improve their home, often borrowing much more than they can comfortably repay; don’t let this be you.