There are several types of home improvement loans available, each with its own advantages and disadvantages. You can get a first mortgage, a second mortgage (otherwise known as a home equity loan or home equity line of credit), a mortgage refinancing, an unsecured personal loan, and / or a grant. Before deciding on a loan, you need to weigh the pros and cons of each one and decide which is the best option for you.
You will need to ask yourself some questions and consider your personal finances. What will the monthly payments be, and can you afford the monthly payments of the loan? Will the improvements add more value to your house than the cost of the loan?
A first mortgage is used when you have already paid off the original mortgage on your home, but it can also apply to borrowers who extend the amount of their original loan. It's a little difficult to get this second type of loan. A second (or third) mortgage can only be obtained when you have built up equity in your home, and the amount of the loan is usually determined by an independent evaluation of your property and its value.
Refinancing will allow you to lower your payments, defer payments or receive money to use on home improvements. A personal loan has fewer requirements, but the interest rates may be higher, and it is dependent upon your personal credit history. A home improvement grant is available for low-income families but has some very stringent requirements to obtain.
To get a home improvement loan, the best option is to check with the lender who holds, or held, the mortgage on your house. You should almost always avoid a home improvement loan that is offered in conjunction with a specific contractor's package, as these are usually a scam that leaves the borrower with shoddy work and huge interest rates.
Another tip for finding a good home improvement loan is to read all documents carefully before signing anything, and to not let anyone pressure you into signing a document without the proper amount of time. Likewise, never sign any paperwork that includes blank spotsthat the lender promises to fill in later.
Above all, you should make sure that you can afford the monthly payments on the loan.
To find a good home improvement loan, start by looking into reputable companies and asking questions of your mortgage lender.
By Jennifer Eblin