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 your 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 your 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?

Ways to earn equity:
Well, what if you decide you're staying put. You thought about moving, but now you realize that improving your present home is a better option. In this case you'll need to understand how you can earn more equity on your home. Because the more equity you have in your home, the larger amount you can borrow to complete your remodeling needs and desires.

Payback Equity
With any mortgage, once you've paid on your loan this paid amount will be the equity you've built up on your home. It's the current value of your property less the amount of the liens secured against it. Let's say that you own a home that is worth $100,000. You have a mortgage with a remaining loan balance of $60,000 your equity in the property is $40,000.

Home Appreciation
Appreciation is the increase in the value of your home. For example: You bought your first home for $100,000 in 1995 with a 10% down payment of $10,000, and a mortgage for $90,000. By 1999, your property had doubled in value to $200,000. This gives you an equity of $100,000 plus the amount of all payments made within these years.

Other ways to earn equity: