One of the largest investments you can make is buying a home, so properly maintaining it is essential for keeping or improving its value. Sometimes these types of improvement projects are planned. Other times, they aren't. What are your options if you want to make an upgrade but don't have the cash in hand? A home improvement loan is an excellent way to get your project started.
Mares Mortgage can help you fund your dream.
These personal loans are unsecured and can be made without providing collateral. Some financing options ask you to provide your home title or some other form of a pledge. These types of loans are not a mortgage or a reverse mortgage, so you will not put your house at risk.
Home improvement loans are typically paid back in small regular installments depending on the amount of the loan. Most of these are paid back within three to five years. Just like other loans, you can still accrue penalties such as late fees. The amount you will be allowed to borrow will depend on your credit history and income. Improvement loans can range from $1,000 to upwards of $50,000.
Related: Recast A Mortgage
There are many options when it comes to paying for a home improvement. Plenty of calculators exist that can help you identify the option that saves you the most money.
These loans typically have shorter repayment timelines and fewer fees than some other options. They’re great for small or medium-sized projects like window replacements or a bathroom makeover.
While they don't require collateral, they do often have higher interest rates. There may also be extra fees such as application fees or penalties for late payments.
Home Equity Loans are a way to invest in your home without refinancing. These loans give you a lump sum of money and are best used when you already have a low mortgage interest rate.
Commonly referred to as HELOC, this is a secured loan backed by your home's value. It usually comes with lower interest rates than unsecured personal loans. A HELOC is revolving credit, making it ideal for long or ongoing renovation projects.
Related: How to Refinance with Bad Credit
For smaller projects, using a credit card may be an option. Some offer interest-free periods for the first few months. You may be able to pay off the balance before interest kicks in—and some even offer cash-back rewards.
However, credit cards often come with high-interest rates if you can't pay the balance before the promotional period ends. These rates are often higher than traditional loans.
If you qualify for a government loan, you might save on interest. A HUD Title 1 Property Improvement Loan allows you to borrow up to $25,000 without risking your home's equity. This is especially helpful for recent homebuyers who need to make upgrades.
By refinancing your current mortgage, you replace your old loan with a new one, potentially at a lower interest rate. If there’s a difference in loan value, you can receive the extra funds for renovations.
But beware: if the refinance only lowers your interest rate without a cash-out option, you won’t receive additional funds. You'll also need to cover fees for appraisals, taxes, and closing costs.
Related: What You Should Know About Financing with a HARP Mortgage
Home improvement loans are considered personal loans, typically used for home-related expenses—but you can use the money however you like. This may include replacing carpet, paying down debt, or lowering your mortgage.
These loans can help increase home value or cover essential updates, including:
✔ Switching out carpet for hardwood flooring
✔ Building a garage
✔ Replacing a roof
✔ Adding insulation
To determine your eligibility, lenders typically look at your income, existing debt, and credit score.
You may be asked:
✔ Your address and phone number
✔ Annual income
✔ If you've taken out other loans in the past 3 months
✔ The amount in your savings and investment accounts
✔ How much you want to borrow
Today, it's easier than ever to apply for a home improvement loan. You can still get a loan through your bank, but that route is increasingly outdated. Online options allow you to compare and shop for the best loan, helping you secure competitive rates and terms that suit your needs.
Getting a home improvement loan is now more accessible and can help you make smart investments into your biggest asset—your home.
Be sure to explore your options and select the best loan for your financial situation.
Ready to invest but still need help? Mares Mortgage is here to make investing in your house and your future easier.
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