Home improvement loan, as classified by the reporting institution, is a loan made to a property owner for home improvements, such as maintenance and repair, additions and alterations, or replacement of existing equipment or any other structural elements in the home.
So, if you are thinking about improving the existing home, home improvement loan is the best idea for the purpose of improving your existing home. A home improvement loan is not only the easiest and cheapest way to make improvements to your home, but there are various other benefits also, such as this loan can be repaid over any term between 5 and 25 years.
It all depends on your available income and the amount of equity in the property that is to provide the security for the loan. There are combined efforts from every level including government, non-profit and other aid organizations to help homeowners.
For example, the Section 203(k) program is the Department’s primary program for the rehabilitation and repair of single-family properties. According to this section, the borrower can get just one mortgage loan, at a long-term fixed or adjustable rate, to finance both the acquisition and the rehabilitation of the property.
According to HUD (U.S. Department of Housing and Urban Development), to improve a multifamily structure, the maximum loan amount is $12,000 per family unit. But remember, it should not exceed a total of $60,000 for the structure. However, please note that these are fixed-rate loans, for which lenders charge interest at market rates and the interest rates are not subsidized by HUD. The good news in this regard is that there are some communities that voluntarily participate in local housing rehabilitation programs and they provide reduced-rate property improvement loans through various lenders. So better to contact them.
There are many financial institutions, banks and other independent lenders who can give you these loans. They are not easy to obtain, but there are many tax benefits also which are attached to home improvement loan. These benefits make the loan very attractive by lowering the effective interest rate by 2 to 4%. Therefore, if you are planning to undertake the repair, remodeling, extension of your house, home improvement loan can be your perfect choice.
However, it is always better to take advice of some professionals like an architect or a structural engineer for improvement or extension, because it is beyond the capacity of a normal person to calculate the actual cost.
Moreover, any structural change in the existing buildings and dwellings requires a clearance from the municipal authorities, so proper documentation is a must. Not only the lenders and banks may also require this, but such municipal authority clearance and documentations along with your structural map.
So, don’t be in haste to apply for the loan unless you know what kind of repairs you want to carry out. And always be prepared for a fair groundwork and shop around for better deals.
By: Rakesh Sharma Jack
Posts Tagged ‘Home Improvement Loan’
Home Improvement Loan – The Easiest and Cheapest Way to Make Improvements to Your Home and Much More
March 15th, 2010A Home Improvement Loan Calculator – How to Use and Understand It
November 21st, 2009
When we set out to begin a major home improvement project, the first things we should be thinking about are our total cost and final budget. However, even with a budget, we can overshoot our material expenses or underestimate our costs, leaving us without backup funds to complete the project.
That’s where loans come in. Loans are a great and often low-interest way to finance major home improvement projects. However, as easy as it is to walk into a local loan office or apply for a loan online, you need to make sure you understand all the costs involved with your home improvement loan.
One tool that helps figure out the exact expenses involved with a loan is a loan calculator. Essentially, a loan calculator works by taking the amount you want to borrow for your project, the number of months you expect it will take you to pay it back and a general estimate of your interest rate. With that information, the loan calculator provides in return a fairly accurate estimate of your monthly loan payments.
Of course, loans can sometimes be a little more complicated than that, so keep reading to learn about the different variables that will help you understand how a loan calculator works.
1. Periodic Payment Figure
The periodic payment amount is the figure that you will need to pay every “pay period.” A standard pay period is usually one month. The amount of these payments is based on the number of payments you’re making or the length of your loan, along with the total principal amount and the interest.
2. Periodic Interest
The periodic interest rate, once settled on by your loan officer, is the amount of interest, or percentage of the total loan, that will be charged every payment or interest period. Remember to shop around for the best interest rate.
3. Total Payments
This is the total number of payments that you will be required to make over the duration of the loan. For example, a 3 year or 36-month term loan will likely require you to make 36 payments. Usually, the sooner you pay back your loan, the better. Of course, a shorter loan period means higher payments. Before making this decision, evaluate your monthly income and general household budget to make sure you’re choosing a payment plan that you can afford.
These are just the basics of home improvement loans and the three factors you’ll encounter when using a loan calculator. Before deciding on and signing a loan agreement, always make sure you understand the terms and all associated fees and costs.
By: Bill McCowen