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The Use of Equity Loan for Home Improvements

Jul 24, 2008
Financing any additional work on your home from a loft conversion to remodeling the master bedroom is going to be expensive and unless you have a large amount of money in savings you will need to arrange a loan for home improvements. Home improvement can be costly, involving contractors, supplies, and tradesmen such as carpenters, plumbers, roofers, and electricians.

Whilst most homeowners are eligible for a home improvement loan, if they do not have a good credit history, they may be required to use their home as equity for the loan. The last responsibility a new homeowner wants is that of it being used as equity for a loan to improve it. Fortunately for the homeowner, an unsecured home improvement loan is available with a fifteen year repayment term if required.

The primary stipulation when applying for an unsecured home improvement loan is the income level of both the owners (where this applies) but the amount of the loan must not be higher than the amount allowed by the county law where the property is situated. The eligibility of the borrower, the property type and the improvements for a home improvement loan are all considered and this type of loan can have minimal documentations required and is relatively easy to process.

The difference with a secured loan just means that the value of the property is taken into account and if there is spare equity then the loan is basically taken out of this. This type of loan is not a new mortgage on the home however and is much faster to organize but because the house is being used to secure the loan should anything go wrong, it does benefit from lower interest rates.

Obviously the amount you are able to borrow will depend on the value of your home. This calculation is worked out using how much your home is worth, how much is owed and of course if there are other loans or debts, these will be included as well.

The next stage is to factor in all this information before a final figure they are prepared to lend is put before the homeowner. Although it is not set in stone, the amount they are prepared to lend will be based on a percentage of the property valuation but some lenders will actually lend as much as a quarter as much again as the property is worth.

Because you are borrowing against your home, it is important that you borrow carefully and you do not overextend yourself or you will be putting your house at risk, at the hands of the creditors. It is never a good idea to borrow more than you can afford to repay, no matter how noble the cause so if remodeling will cause financial hardship, restrict the loan to cover just the essentials of maintenance and leave the remodeling until another time.
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Adventures In Home Renovations offers more accurate information, visit this link: Home Improvement and Real Estate.
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