Many people are extremely proud of their homes and will go to great lengths to keep it looking up to date or stylish. From time to time thay even get an idea to completely remodel the house by adding an extension or expanding an existing room. Apart from the fact that they will have a nice, modern looking house there are a number of other benefits. Firstly some people actually get a lot of satisfaction out of doing up their home. They can learn useful DIY skills and like to take a project from conception through to completion. Another obvious benefit of such a project is that it can make you money. A well conceived improvement project can put 20% more on the value of your home. However, the attraction of making a bit of money from your home renovation project can be a great motivator but the first thing that many people have to think about is where will I find the money to start the project. There are many ways to finance a home improvement project, one being the home improvement loan. This article will answer some of the common questions that are asked about home improvement loans and help you make a better decision.
What’s a home improvement loan ?
A home improvement loan is a sum of money that is secured by the value of your property. This is generally a lump sum that can be used how you see fit.
Why do you need a home improvement loan ?
A home improvement loan is not compulsory but is for people that don’t have a large lump sum of cash sitting in their bank account doing nothing. As already listed, a home improvement loan is used for any type of renovation or improvement project that you have lined up. This can range from the big project, like adding a games room or a swimming pool to smaller in scale, like refreshing the tired looking carpeting with hardwood floor boards. Having said this, a loan will normally have a minimum and maximum amount that can be borrowed based on various criteria set by the loan company. This is covered in the next question.
What amount can I borrow ?
This varies depending the type of loan product that you decide on. In general, the loan product is based on the loan to value of the property that you are working on. It can also depend on the amount of equity that exists in the property. As a pointer, most financia institutions won’t lend much more than 15% of the total value of the property but this may also depend on you rability to pay back the loan.
What is the maximum period of time that I can repay a home improvement loan ?
Again this depends on the type of loan product that you are using. However most home improvement loans tend to be last over a period of 5 to 25 years.
How do I select the right home improvement lending institution for me ?
In most cases, people look at the interest rate that they will have to pay for the particular loan product. They can also look at the reputation of the particular lender although once you have the money this doesn’t really matter.
You should also consider any extra costs that will come with the product, like an application fee and appraisal costs. Check all the fine details for any penalty clauses such as late payment or early repayment penalties. Above all, go for a loan that suits your requirements as there are so many to choose from that you can afford to be picky.