So, you have finally decided to do something about your house. Maybe it’s updating your kitchen, getting new siding, or remodeling the basement into a family room. Whatever the case may be, you need to know about financing home improvement. Here are some things you should know before trying to get a loan for that purpose.
Your first course of action should be to talking to the lender that gave you the loan for your current mortgage. This is because you already have a relationship with them, so they will know something about you, and vice-versa. Furthermore, they have an interest in the value of their home. It actually works to their favor if you can do things that improve the value of their collateral (which is your home).
Because you already have some value in your home in the form of equity, the most common way of financing home improvement is through a home equity line of credit. That being said, due to the current state of the economy, these are harder to get than they used to be, but it is still possible.
If you have solid credit and you can demonstrate that your improvements will add to the value of your home, then you will have an easier time of getting the loan you want. While a lot of homeowners wish lenders would just loan them money whenever they feel like it, it’s actually better that they don’t because it puts the breaks on too much overextending of credit.
No matter what type of improvements you’re thinking of doing, you should start with a detailed plan of what needs to be done. This includes getting estimates, crunching numbers and making a budget. Once you arrive at your figure, it’s a good idea to add an extra 10% to 25% to take care of the inevitable cost overruns. Then, when you go to the lender you will have a much better idea of much the project is likely to cost, as opposed to just asking for an arbitrary amount. By taking these preliminary steps you will actually save yourself money in the long run.
Another thing to keep in mind with financing home improvement is that not all projects will add to the value of your home. Sure, they may add to your enjoyment of it, but come sale time, they won’t bring in a higher selling price. Knowing which projects add to the appraised value will help because lenders like to see that their collateral will be increasing in value.
So, now that you know more about home improvements and how to finance them, it’s time to approach various lenders to get a loan with the best terms. An easy way to do this is by going online. This will let you compare several offers side by side; helping you to find the loan that is best for you and your situation.
