Owning your own home is one of the life’s greatest joys since you can do absolutely anything with it — add a swimming pool, make it more home efficient, and add more rooms among others. However, all these come at a significant cost. Fortunately for you, you can opt to take out a home improvement or remodel loan so you can obtain some money for your grand remodeling plans.
The Most Basic Home Improvement Loan Types
According to American Loans, home improvement loans come in two basic types — those requiring a down payment and those that use your home equity. Mortgage loans that the equity on a home as collateral are among the most common and provide the highest amounts. However, the majority of lenders require borrowers to maintain a 15% equity after the remodel loan, says Salt Lake City mortgage officer, so you will require a relatively huge amount of home equity in order to qualify.
You can likewise opt to take out a loan and pay off the down payment instead of using your home equity as collateral. However, if you don’t like tying up your home equity, you may be offered a loan with a smaller amount, but a higher interest. Regardless of which loan type you choose, always shop around for the best deal you can get.
While your current mortgage lender is an obvious option, it might not be the best idea for you. To ensure that you’ll get the best deal, compare offers from different lenders, which include your current mortgage lender. Additionally, note that applying for a couple of loans or asking for pre-approval will not put a dent in your credit rating because major credit bureaus collate similar loan applications into only one inquiry. It will actually aid you in finding the best loan terms and most favorable interest rate.
If you are really intent on doing your home improvement plan, take careful consideration on how you’ll fund it. Using your home equity may be the most economical choice, considering that you have ample equity and are sure that you won’t risk losing your home by missing monthly payments. In some cases, however, personal remodel loans will actually make more sense as long as you look around for great deals and are sure you can afford it.