Remodeling with Home Equity Loans

Remodeling with Home Equity Loans: The Advantages

There are some real advantages to using home equity loans for home improvements. You can borrow enough to completely remodel your home, or just to make some small specific alterations. Lenders don't place restrictions on the type of project, as long as it conforms to your local building code requirements. Usually, you have the option to do the work yourself or hire a general contractor. However, if you aren't a licensed contractor, some lenders may require you to hire a licensed professional for the parts of the project that require technical knowledge, such as electrical wiring.

The right loan

Before you apply for a home improvement loan, consider the type of project the money will be used for. If the project has a set price that will be paid upon completion such as replacing the roof, a home equity loan for a fixed amount is a good choice. These loans give you a lump sum that you pay back in monthly installments with a fixed interest rate.

If the project is large, like remodeling the kitchen, where the cost can increase as the work progresses, a home equity line of credit (HELOC) is the better option. A HELOC has the same flexibility as credit cards. In the case of a HELOC, your lender would give you a credit card or a checkbook, and you could withdraw money in varying amounts, as needed.

Home equity loan rates

A home equity loan's low interest rate and tax deductibility are additional reasons why it's often used as a home improvement loan. Terms for such loans can range from five to 30 years. The minimum amount you may borrow is generally about $10,000. However, most lenders will limit a home equity loan for home improvements to a maximum of $1,000,000.

Remodeling your home can significantly increase its value. When you need to finance a home improvement project, regardless of the size, a home equity loan is a good choice.