Your home is obviously extremely important. It shelters you from the elements and becomes the place where you craft not just your most important memories, but your very identity as well. That’s why it’s equally vital to take care of your home and continually look for ways to improve it. Your home, after all, is a reflection of who you are and what type of life you’ve lived, and it should change and improve over time, much like you did.
This particular type of loan is considered ideal when the rates and terms of the transaction arelower than the actual mortgage. Essentially, a cash out refinance is when a borrower takes out a loan on property that the borrower owns. Essentially, this will be an entirely new loan that takes the place of your first mortgage. Housing loans of this type usually have lower interest rates than others, but it does have a closing fee. To further illustrate what a cash out refinance is, let’s say you’ve a home valued at 250,000 dollars. You owe 100,000 dollars, leaving 150,000 dollars in equity. This equity can be liquidated with a cash out finance loan, giving you the finds that you need for your home improvement plans.
Fixed Rate Second Mortgage
This, then, is the ideal type of loan to go for if the terms of the existing mortgage good enough. The fixed rate second mortgage is also known as a home equity loan. Unlike the cash out refinance option, the home equity loan is a separate loan on top of your first mortgage. The payments and the rates of the fixed rate second mortgage are fixed, and the term for this type of loan usually reaches up to 15 years. This is amortised for 30 years in order to lower the rates. This loan is ideal for borrowers who require a larger sum of money upfront. If you’re looking to improve your home greatly, or even planning on renovating or basically making major changes, this is the option that couldbe ideal to you. This particular loan also works for people who prefer stability, what with the fixed rates and terms that this loan comes with.
Home Equity Line of Credit or HELOC
Of the three options available, this particular type of loan is considered to be the most flexible. Borrowers will be using a pre-approved credit line that’s secured by the property. One huge benefit of the HELOC is that borrowers only need to pay interest for the actual amount they use. The basic concept is very similar to the credit card. The interested rate is adjustable, adding to the loan’s flexibility, and lenders allow the borrowers to fix the rate throughout the period of time the loan exists. All of this makes the HELOC a preferred loan type for people who’re going to pursue long-term home improvement projects or projects that have several phases.
With all of these choices making financing your home improvement projects more attainable, there simply isn’t any excuse not to pursue that home improvement project you’ve been thinking of doing. Be sure to ask your lender everything you can to find out which loan truly fits your needs and start improving your home right away.
Home improvement costs money though, and in case you can’t afford it, there are lenders out there that are more than willing to provide you with a housing loan that’s geared towards home improvement. There isn’t just one type of housing loan you can get for such a purpose.