Secured Home Improvement Loan
Buying your home is probably the biggest investment that you will make during your lifetime. So, it goes without saying that you want to maintain, if not increase, the overall value of that investment. In order to do so, you may need to repair, remodel, or add to the existing structure. A secured home improvement loan can help you accomplish these tasks without breaking your bank account.
A secured home improvement loan uses the borrowers home as collateral to secure the loan. The maximum amount that homeowner can borrow with this type of loan is usually based on their credit history as well as the equity that they have in their home. Many lenders will also take into consideration the amount of equity that will be available after the home improvements are made. The amount of equity available in a home is determined by subtracting the amount owed on the home from the appraised market value of the home. Most lenders will not approve secured home improvement loans that exceed 80% of the value of the home but there are a few that will allow up to 125% of the value of the home (see 125 home improvement loan).
Taking out a secured home improvement loan can be risky because you are using your home as collateral. Should you default on your secured loan, you will lose your home. Secured home improvement loans also have a longer pay back period. In many cases they are considered to be a second mortgage so they are assigned to a 25 or 30-year payback period. While this will lower the monthly amount you have to pay on your loan, it will cost you more in the end due to the accruing interest on the balance of the loan. If you are looking for a higher payment with a shorter payback period you may want to consider an unsecured home improvement loan. Regardless of which type of loan you choose, make sure you can afford to make the extra payments.
As with any home improvement loan, it is important to make your loan work for you. Use it wisely to make improvements that will add value to your home. This will really make a difference when and if you decide to sell it, especially if you still owe money on your mortgage or home improvement loans. The ultimate goal is to make your home worth more than what you owe thus giving you a positive return on your investment.
Using a secured home improvement loan to finance any repairs, remodeling, or additions can pay off big in the end. However, you should never take out any type of loan without carefully considering it first. Talk with your lender to learn more about secured home improvement loans.