Over the course of time, the house that was bought sometimes starts showing signs of needed attention. It is natural that with age comes the need to do more to maintain and update your house. Most of us do not have thousands and thousands of dollars just lying around somewhere that we can tap into in order to make these worthy improvements. That is where a home improvement loan can be so useful.
A home improvement loan can take on many different meanings, but the main idea is that a home improvement loan is a loan given in order to pay for improvements to a house or another form of real estate. A home improvement loan is different from a traditional home loan in many ways. First of all, the house itself serves as the main collateral for the loan in a home improvement loan, but at the same time you are improving your credit by paying back the loan, you are also increasing the value of your house (especially resale value).
A home improvement loan will also commonly go by many different names. Different banking institutions have used terms like “home remodeling loan” or “remodeler loan” to describe the same type of loan. Usually in order to calculate how much you may possibly be approved for on your home improvement loan, the lender will usually add the value of the planned improvement to the home’s current value in order to determine how much they will be willing to lend.
But getting a home improvement or construction loan is not as easy as it may seem. Home improvement loans are for assets that do not yet exist. When you apply for a traditional home loan, the bank has the peace of mind of knowing that they will most likely be able to recoup any costs you are unable to pay by repossessing the house. With a home improvement loan, yes, there is still a house that is up for collateral, but it is an incomplete house or at least worth less, especially if failure to make a payment comes mid-renovation. Because lenders are taking some less predictable risks, you may be surprised at the lengthy approval process.
So make sure you are serious about your home improvement loan and have done your research to ensure that you have a solid idea for how much it will cost you to make the changes you want to make. Even though it is a lot of work and the loan approval process might be stressful (especially if your credit history or mortgage payment history is less than perfect), there are hidden benefits to getting a loan and doing a home remodel. Just one of those benefits is a tax deduction. Many home improvement loans are lines or revolving lines of credit. This means you only pay interest on the amount of the loan that you draw from. Home equity lines of credit are often set up so the variable rate is based on the prime rate. What this means for the borrower is that if the prime rate goes down so too will your loan payment, but the opposite is true as well for increases for a home equity loan with a fixed rate is also something to consider. Most of the standard stipulations that accompany loans will apply to your home improvement loan (for example, you will pay off the interest on the loan before the principle).
Getting a loan for a home remodel is as simple as having good credit and a home worth making improvements on. So long as you have those two things working for you, your home improvement loan can be your ticket to making your home the way you always wanted.
Check with your local bank for terms and conditions. Get a professional builder to help you with the estimate for work to be done. When you know you are going to stay in your home at least 5 more years, a remodel might be beneficial.
Information for this article was taken from http://www.homebuildingremodeling.com
Always look at the Texas Residential Commission Construction site for registered builders (http://www.trcc.state.tx.us or call 877-651-TRCC). For all your real estate and building needs or questions, call Debbie at (830) 833-4249 or email@example.com.