Last updated on 09/03/2021
Home Improvement Financing allow you to renovate, modernise, maintain and expand your home, improving its use for your family and reinvesting in its value now and should you decide to move up.
To maintain value you must maintain and update your home, to increase value you must look at home improvement financing options to remodel, improve or extend your home.
Adapting interior and exterior spaces to your present day needs is the key to really enjoying your home and adapting your home to ECO clean green living with remodeling for energy efficiency.
Fluctuations of interest rates and overtly expensive moving costs have contributed to many home owners taking a new look at their own home and assessing it’s present value against its true potential, given that the cost of improving is usually far lighter then the cost of moving to a larger improved home in the same area.
Home Improvement Financing Options for the 2020’s
- Personal loan
- Home Equity Loan
- Home Equity Line of Credit (HELOC)
- also look out for Grants
You will notice that the first two do not include “Home” in the option. Neither Savings or a Personal Loan do not use your home as collateral and that’s a good thing.
Savings: The best way to finance small home improvement projects is through savings. No interest rates, no long term repayments on top of your current mortgage. What could be better. Home improved, value increased, done !
Personal Loan: is an option for small renovations and the terms are individual, depending on your credit score.
If you have a good score you will be offered a lower rate meaning more manageable monthly repayments and less interest throughout the loan.
Keep in mind that if you take on longer repayment terms for a lower monthly payment you will end up having to pay more over a longer term in the form of interest.
A Home Equity Loan: is a standard loan based on the amount of equity that you have built up over the years – the value that you have paid into your house. This is the most popular type of home improvement financing.
A home equity loan lets you access it in ONE LUMP SUM to cover your home improvement financing costs.
Another advantage is the long term fixed rate payments available, making the loan easier to pay off over a longer period. Getting a Better Deal by changing your present mortgage for one with better terms is also another great way of potentially saving and freeing up capital for your home improvement projects
Home Equity Line of Credit (HELOC) is similar to the home equity loan, except it works like an open line of credit instead of one lump sum.
You are able to make payments to contractors and pay for materials as you go along with a credit card or from a checking account. You can take out funds as and when you need to and you pay interest on money spent.
Remember, the equity line loan is usually not fixed rate and your repayment amounts will be subject to rate fluctuations – However – some companies are now starting to offer a home equity line of credit with a fixed rate!.
The interest you pay on your Home Equity Loan or Home Equity Line of Credit may be TAX-DEDUCTABLE, (not the case with a personal loan for home improvements). Check with your financial advisor / loan officer to see is this applies to you.
*Please Note: It is usually better not to apply for a home equity loan if you plan to refinance your first mortgage in the near future.
Look out for any new Weatherization Grants for home improvements i.e. for insulating your home and reducing your yearly utility bills.
Financing Your Improvement Project
If your home improvement financing project is mainly concerning smaller, but important repairs for example, replacing gutters, replace a couple of windows, or perhaps updating the furniture in your family living room a Personal Loan, may be sufficient to meet your needs.
If You Do Most of the Work Yourself!
If your planning home improvement financing for a bigger project, but your still going to “do it yourself”, or at least the major part, then you really should to seek more advice from you financial advisor because, depending on your individual circumstances, you may be toeing the line between needing a personal HOME IMPROVEMENT LOAN or a HOME EQUITY LOAN to cover your project.
Call in the Professionals
Take a closer look at HOME EQUITY LOAN or HOME EQUITY LINE loan offers, especially if your project needs that all important certifications proving works done professionally with local planning building consent and to your areas building codes, those works that go towards increasing your homes value.
Call in the professionals for construction work, carpentry, plumbing and electric wiring, for major repair jobs, maintenance, conversions, retiling the roof, putting in a skylight and building extension projects to name a few.
Work The Numbers
Work out your Home Improvement Financing Loan, work the numbers to see which home improvement financial option will work best for you.
Your starting point is the value of what you already own. How much money in the form of mortgage payments, which have become “equity” you have invested in your home so far and what amount is outstanding. How high are your monthly repayments and how much higher you can go.
If you manage to consolidate your existing payments with your home improvement financing loan, you may end up paying less per month over a longer period.
Keep working the numbers for your project, take into consideration payments to contractors, sub-contractors, general labor, materials (including paint, flooring, insulation, tile and delivery of), payment for plans, permissions and permits, tools, safety equipment, fixtures insurance, AND a contingency amount for any unplanned expenses.
For those who have already paid off a large part of their mortgage, refinancing or remortgaging options are easy.
Serious Stuff on Financing Home Improvements
Your current mortgage lender, maybe your bank, may not have the best rates. Shop around, look for the best deal for your needs. Choose a company with a proven track record, well documented customer care and with readily available TESTIMONIALS from happy clients.
You need a company that respects your security, privacy and who works with a caring yet professional approach.
This important message should be clearly visible on their web site and on all other literature:
“YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED ON IT”
YOU DON’T want a company that is prepared to lend you more that you can afford, or allows you to go to the limits of your finances. (remember to read ALL of the SMALL PRINT regarding terms)
Home Improvements done incorrectly, without the necessary planning permission and without the certificates from qualified contractors for works done can actually reduce the value and/or saleability of your home.
Of the thousands and thousands of financial lending companies out there, it is important to find one with good informative information and easy to contact details. Make a short list of RECOGNISED LENDERs, there are excellent companies out there, MANY who have won prizes and acclaim for their excellent service.
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