One of the ways you can add value to your property is to make home improvements ― this can include remodeling a room in the house, upgrading certain features, or even building an addition. However, few homeowners have the cash on-hand to accomplish such expensive projects. As a result, it is often desirable to get a home improvement loan.
When you borrow money to make home improvements, you are expected to use the money to pay for materials and labor in order to add value to your home. Most lenders want to be assured that your improvements will reduce their risk of losing money if you fail to repay on the loan. If you make improvements to your home, its increased value will help the lender recoup some of their funds in case you do default.
Most of the time, a home improvement loan is based on the equity (or ownership) you have built up in your house. Your equity is determined by subtracting the remaining balance on your mortgage from the market value of your home. If you qualify, you can then secure a loan with that equity. The loan can be used to finance your home improvements or remodeling. Typically, home improvement loans are either paid out in a lump sum, or offered as a ‘line of credit’ that you can draw upon as needed.
In some cases (especially if you are doing a smaller project), it is possible to get a home improvement loan through “In-Store” financing. If you visit a home improvement store, you may be able to get in-store financing for the materials you buy there for home improvement projects. If you can do the project yourself, in-store financing can be particularly helpful. Additionally, if the store offers installation services, you may be able to get financing to help cover the cost of labor.
It is important to remember that no matter where your home improvement loan financing comes from, you are borrowing money that will have to be paid back with interest. Therefore, it is wise to only borrow what is necessary and don’t go overboard. If you find that you have borrowed more money than you need, consider using the excess to repay some of the loan ― rather than spending it on something else. A home improvement loan can help you add value to your property in a manner that you might not have been able to accomplish without this particular type of financing.