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Home Improvement Financing 101
By Elijah James Let's face it, kitchen floors and new window
panes don't grow on trees. Even though home improvements are an investment
that will make you money in the long run, finding the financing you need now
can be difficult, and not getting an adequate amount of funding for your
projects can lead to compromises in quality that you may later regret. Homeowners have a variety of options when it
comes to finding the right bank. They can borrow against the equity in their
homes and various federal loan programs also exist for borrowers. Here's a
few options you may what to consider: Mortgage refinancing: Now is the time to take
advantage of historically low interest rates by refinancing your mortgage to
pay for home improvements. You can refinance your mortgage and borrow money
against the equity you have in your home. Some banks even offer loans that
allow you to borrow more money up front by adding the value of the planned
improvement to your equity. Refinancing your mortgage for home improvement
purposes is a good deal because you'll have the convenience of just one home
loan and monthly payment. Home equity loans: These loans, also known as
second mortgages, lets homeowners borrow money by leveraging the equity in
their homes. They're popular among folks looking for financing because
homeowners are able to deduct the interest from their federal taxes. Federal Title I loans: If you don't have much
equity in your home, you may qualify for a Title I loan. These
federally-backed loans offer negotiable interest rates and can be tapped for
about $25,000. The loans can only be used to pay for essentials however,
such as improvements made necessary by a medical condition, not luxuries
like swimming pools. One method of home improvement financing you
want to avoid is financing through a contractor. These loans often are made
by sub-prime lenders and come with hidden fees. Also, getting financing
through your contractor puts you in a poor bargaining position with him when
it comes to getting a quote for your home improvement project. When hiring a
contractor, it's best to have your budget and finance already prepared to
ensure the best deal. Home ownership is like any other investment -
you've got to spend money to make money. But to get the most out of your
home investment, make sure you get your home improvement financing right.
Borrow from reputable lenders and don't overextend yourself.
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