Home Improvement Loans versus Equity Loans | Home Improvement

By RickGomez
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When a home needs some maintenance work carried out, an ideal way to ensure this can be achieved is by arranging a remodeling program, providing you can raise the finance; one option is to apply for a home improvement loan to finance the project. Very few people want to attempt many of these home improvements themselves so tradesmen such as electricians, plumbers and carpenters will need to be employed.

Two types of home improvement loan exist; secured loans which are based on the equity in the property and those that require no security at all. Loans that do not require security are quite flexible and even new homeowners can apply. Finance which is used to improve the home is seen as a good investment in the property and even if equity in the property is not required, the loans can be organized for up to 15 years at a time.

The eligibility for finance without equity can depend on the combined household income, which should not exceed the county limit where the property is located. Although a number of details of the applicant are looked into, these loans are relatively easy to arrange and there is not much documentation to complete.

For people with small mortgages and high value homes, a home improvement loan that is secured is often a preferred method to finance remodeling costs. This is not the same as your original mortgage; instead, it is an additional loan that is often easier to obtain and process compared to a regular mortgage; usually providing lower interest rates than other types of finance.

This is not an open ended finance agreement and a valuation of your property will be required for a secured loan to be arranged. The lenders need to be assured that there is in fact equity in your property and that any loans already outstanding will not interfere with any new arrangement made by them if they agree to a loan.

After this has taken place, the lenders will put a package forward which may not necessarily be for the full amount the homeowner wanted. Usually, finance companies will lend you a percentage of the assessed value of your house but some lenders can lend as high as 125 percent of your home's equity.

An equity based loan can be risky if you arrange to lend an amount greater than you can comfortably afford so consider this carefully as you may end up handing your beautiful home over to your creditors. Home improvement loans can be a wonderful way to tidy up an aging home but remember that they need to be paid off and if you are likely to struggle, reduce the amount you want to borrow.

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