Home Improvement loans are usually granted for improvements that will increase the value of the home as well as for repairs that will help hold its value. A home improvement loan can help you with a new kitchen or bathroom, an extension or loft conversion, a conservatory, landscaping your garden, new furniture and much more. Decks and landscaping can also be classified as home improvements since they help in enhancing the quality of a home or boosting its resale value. Moreover, addition of driveways and swimming pools come within the gamut of home improvement activities.
Home improvement financing options
There are several ways of obtaining home improvement loans. You can either opt for home equity loan or home refinancing loan or a simple personal loan.
Home Equity Loan: In this case you are borrowing money on the value of your home. Home equity loan can be a good option if you have already built up substantial equity in your home. It can also be a prudent choice if the home improvement project that you are undertaking increases the value of your home in excess of the loan. You can borrow up to 80% of the equity in your house. You can avail of a home improvement loan of nearly $60,000 for a home that is valued at $125,000. Merely having a built-up equity in the house does not mean that you should go in for a home improvement loan. Home improvement loans must be taken after weighing the pros and cons carefully. You should be able to afford the monthly payments and ensure that the house is worth more than what you owe for the loan.
Home Refinancing: With mortgage refinancing, you can significantly lower your monthly payments for an existing mortgage or even defer some of these payments. This can leave more money in your pocket. Home refinancing works well if your original mortgage has a higher interest rate than the current prevailing market rates
Personal Loan: Personal loan for home improvement doesn't require you to have equity in your home or borrow against the value of your home. It is a loan disbursed by either a finance company or bank to finance your home improvement project.
Acquiring a home improvement loan
In order to avail a home improvement loan, the homeowner must lay out a plan for the home improvements that he wishes to undertake, including costs of all improvements and actual estimates from the contractors. This information is then presented to the lending institution as part of your home improvement loan application.
Generally home improvement loans are given against your original mortgage. Thus the loan is extended for remaining period on the original mortgage. For example, if you had taken a 30-year mortgage and there are 15 years remaining on it when you apply for home improvement loan, the lender will set the term at 15 years so that it ends when the mortgage ends.
If granted a loan for home improvement, the money is paid out in increments in proportion to the work that is being carried out. It is usually paid directly from the lender to the contractor. Occasionally, the money may be given to the borrower but only if he produces the receipts for reimbursement of payments to the contractor. Taking a loan for home improvement can help you avail tax deductions while increasing the value of your home with refurbishment.
Home Improvement Grants
The American Government grants program offers financial help to low income families to buy a new home, repair the current home, rent, mortgage payments, utility bills, purchase a new car, groceries, childcare, fuel, general living expenses, academic tutoring, clothing, school supplies, housing assistance, legal services, summer camp, debts, music lessons, art lessons, extracurricular activities, pay bills for senior citizens, real estate taxes, medical expenses and general welfare. Since HUD aims at expanding home ownership opportunities and neighborhood revitalization, the Section 203(k) program seeks to rehabilitate properties in partnership with state and local housing agencies and non-profit organizations.
The government has recruited many private agencies to help citizens obtain their grants. However each grant has its own set of rules and regulations to be followed. The local agencies provide information and assistance in this matter.
Senior citizens grant is a home improvement grant that is available to dwelling owner/occupant who is 62 years of age or older. This grant is specifically for home improvement and funds can only be used for repairs or improvements to remove health and safety hazards or to complete repairs to make the dwelling accessible for household members with disabilities.
The home improvement grants also include low-income homeowner grants to repair, improve and modernize their dwelling or to remove health and safety hazards. However these grants, issued directly by the government through private agencies may be recaptured if the property is sold in less than three years. Similarly home improvement grants are also available to some of the following special interest groups - American Indians, Veterans, family members of veterans, low income families, community block grants, non-profit organizations, first time home buyers, artists, musicians, nurses, teachers, researchers, disabled people and those suffering from HIV and AIDS and substance abuse.