So you want to add a room to your home, add a pool or just update your kitchen?
As a homeowner, you’re able to use the growing equity in your home to finance home improvement projects. With a home improvement loan (better known as a home equity loan), you can convert the equity in your home to cash for one or multiple home improvement projects. And in some cases actually increase the value of your home.
The three most popular home improvement loans are:
Home equity line of credit:
If you’re not sure of how much your remodeling project will cost or if the project may last for many months, then this type of loan will work for you because it allows you to draw from a reusable source of cash.
Home equity loan:
If you know how much your project will cost or want to borrow only a specific amount of cash, then this type loan is for you. With this loan type, you will be limited to the amount you borrow. So if the are any unforeseen problems that need to be addressed during your remodeling project, the cost for that will come out of your pocket.
Home improvement loan:
So you’re remodeling, but you don’t have enough equity in your home to cover the costs. So now what? Well, a home improvement loan may be your answer. This works a bit differently than the above two loan types. This loan allows you to borrow against what equity you have built-up and borrow against the future value of the “qualified” home improvements.
Qualifying home improvements are:
- Room additions
- Kitchen remodeling
- Bath remodeling
- Garage addition
- In-ground pool or spa
- Deck addition
- Window replacement
Before applying for any type of home improvement you must have a firm contractor’s bid as evidence of their qualifying home improvements’ value. If your still not sure what type of loan you should apply for, then answer the following questions:
Which loan type is best for me?