Homeowners will typically agree that the “work is never done”. There is rarely a time when there is no “to do” list or set of projects that need to be completed. While it can be fun to maintain the home continually, if there are major repairs or updates needed, it can be a bit difficult to manage. This is particularly true if you don’t have the cash on hand for the work. Fortunately, there are home repair loans available, and they can supply most homeowners with the money needed for almost any sort of repair or project.
Interestingly enough, the loans come in a variety of formats, and there are many things to know about them. Let’s look at 12 of the most important:
- Equity – Described as a secured home repair loan, second mortgage or equity loan, this is a way of getting funding by tapping into the equity in your home. The equity is the difference between what you owe and what the home is worth. Clearly, the more you’ve paid down the mortgage and the more value the home has accrued, the bigger the loan amount. You can also deduct the interest if the funds are used exclusively for home repairs.
- The age and condition matter – Your home’s age, location, size, condition as well as your credit score can impact the amount you receive.
- Credit cards – Many people finance their improvements using credit cards. That is because they like to get the rewards and can avoid interest if their credit card has a 0% interest option. However, if you don’t pay off the balance in the allotted time, that interest can be quite punitive.
- Line of credit – There are loans, and there are LOCs or lines of credit. The LOC could be ideal if you don’t have a fixed budget or list of items you’d like to improve or repair and you can continually dip into the LOC for funds.
- Refinance – If you don’t want a second mortgage or LOC, consider refinancing the entire mortgage and cashing out for the amount needed for the costlier repair.
- Don’t count on loans for rentals. Owners of rental properties are not usually going to find it easy to obtain repair loans for those properties.
- Unsecured loans – If you are not eager to get a second mortgage, LOC or use credit cards, there are some options for unsecured loans for home improvements. You’ll want to shop around to get good deals, and sites like Lendkey are great for such options.
- Have you considered upgrades versus costs? One thing you will want to do before even looking at loans is to be clear that the project is going to boost the value of the property. As one expert asked, “if you take out a loan to update the bathroom, will it take you two years or 10 years to repay? If it’s the latter, your bathroom may be outdated by the time the loan is paid off.”
- Is now the time? Of course, you also have to look at the current economy. If the repairs can wait for better markets and rates, you’ll want to hold off.
- Work with a contractor. One way to make the most of home repair loans is to get a full estimate from a contractor before going for the loan. This way, you prove you’ve done the homework and know what you are doing.
- Consider tax benefits – As mentioned some loans come with tax benefits, and you won’t want to overlook this issue.
- Be clear about all terms – No matter what sort of loan you use, be very clear about the terms (rates, fees, and so on).
Now that you know more about home repair loans, it is a good time to look around and see if one can benefit you.