Getting a Loan for Home Improvement

Home improvement loans can provide tax deductible money for a complete remodel or specific improvements, transforming your house into a home, while also increasing your property value.

A home improvement loan is placed in second or third position on the title of your home. It is essentially a second mortgage or home equity loan, which is paid to you in one lump sum or in draws at the loan closing. 

Home Improvement loans are great for remodeling or doing major home improvements (such as building a pool) that require a larger loan amount.  If you want to borrow relatively small amounts, and pay off the loan quickly, a line of credit can provide more flexibility.

Typically we place no restrictions on your home improvement projects, as long as they are within the boundaries of your local building requirements, and depending on the scope of the job, you have the choice of doing the home improvement work yourself, or hiring a contractor.

Home Equity Line of Credit (HELOC)

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A home equity line of credit (HELOC) works more like a credit card. You are allowed to borrow up to a certain amount for the life of the loan -- a time limit set by the lender. During that time you can withdraw money as you need it. As you pay off the principal, your credit revolves and you can use it again. Let's say you have a $10,000 line of credit. You borrow $5,000, but then pay back $3,000 toward the principal. You now have $8,000 in available credit. This gives you more flexibility than a fixed-rate home equity loan.

Credit lines have a variable interest rate that fluctuates over the life of the loan. Payments will vary depending on the interest rate and how much credit you have used. When the life span of a line of credit has expired everything must be paid off. A lender may or may not allow a renewal.

Lines of credit are accessed by specially issued checks or a credit card.

Financial institutions negotiate a home equity loan just like they do a mortgage: You have to pay off the loan or line of credit when you sell the house.