Learn About the Best Home Improvement Loan Options
If you have just planned out your home improvement project, you must already know that one of the crucial aspects is sorting out your finances. Home improvement loans act as the best solution when instant cash is thin. Learn about the best home improvement loan types and select an option that meets all your needs.
A personal loan is an unsecured loan -- given to a qualified borrower as a lumpsum fixed amount -- that is not secured by any residential property or collateral. The amount is highly dependent upon the borrower’s credit score, qualifications, and ability to repay the loan. The term or length of the unsecured personal loan varies between 24 months and 72 months. The interest rate and monthly payments are fixed.
Home Equity Line of Credit (HELOC)
HELOC is a revolving line of credit that is secured by residential property and used to access the existing equity in the property. It is usually a 2nd mortgage as it is obtained in addition to an existing mortgage when the borrower does not want to refinance or payoff an existing mortgage. The borrower can draw (borrow) any amount up to the credit limit as funds are needed. The term of these variable rate loans can be between 10 and 30 years.
Apart from the above popular options, home renovation projects can be financed by several other loan types as well. Whether it is a mortgage or home equity loan, you can check out the best home improvement loans for your situation and pick the right loan and lender.
Conventional “Fixed Rate” Mortgage
Conventional Fixed Rate Mortgages have interest rates that are fixed and do not change over the life of the loan.
Conventional “Adjustable Rate” Mortgage
Adjustable Rate Mortgages (ARM) are 30-years loans that have interest rates and payments that change periodically (i.e. monthly, semi-annually, or annually).
Fannie Mae HomeStyle Renovation Loan
This loan allows borrowers to purchase or refinance a property in need of repairs or improvements, and to finance the cost of the renovations into the loan.
FHA 203k Loan
An FHA 203K Rehabilitation Loan is mortgage that is insured by the Department of Housing and Urban Development (HUD). It is designed to provide consumers with financing to buy (or refinance) a property in need of renovations and simultaneously fund the improvements.