The cost of remodeling a house
is a major factor in the whole planning process. After all,
renovating is expensive, and money doesn't grow on trees.
What are your options for financing home improvement
projects?
The simplest way to pay for a renovation job is with cash.
If you've been smart with your money and saved over the
years so you can afford to improve the value and enjoyment
of your home, you probably have a savings account set aside
just for this purpose. Cash is the fastest and easiest way
to make payments because you're in charge - there are no
forms to fill out, appraisals to schedule, and no waiting.
The one negative point is the fact that spending the money
means it won't be earning you interest anymore and the
expenses associated with the project aren't tax deductible.
But with new equity in your home and freedom from loan and
interest payments, cash is always a good option.
But what if you're like most people, and don't have the cash
available right now? What can you do to access the necessary
funds? If you're in this situation, a home improvement loan
may be the right solution for you. The Federal Housing
Administration (FHA) provides 2 loans designed specifically
for home improvement. The Title I loan lets you borrow a
maximum of $25,000 for a single family dwelling at a fixed
rate. The FHA even provides insurance against risk of
default. How do you go about obtaining such a loan? It's
quite simple - just apply through an approved lender and
you'll be on your way to financing your dream.
The second option is the Section 203(k) loan designed
especially for a fixer-upper. In order to help you purchase
and improve the property, these loans come in the form of a
single, long-term, fixed or adjustable rate loan. Again,
simply apply through an FHA-approved lending company to gain
access to this type of loan.
Lastly, you can use the value of your home to your
advantage. A home equity line of credit is a form of
revolving credit that uses your home as collateral. This
type of loan usually offers you up to 75-80% of the
appraised value of your house minus the balance of your
mortgage. Other factors are also taken into consideration,
such as your credit history and ability to pay back the
loan. These loans tend to carry a variable interest rate.
Once you're approved, you can go ahead and use the funds for
whatever project touches your fancy. It's a very convenient
way for most homeowners to finance home improvement
projects. |
