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What kind of loans are there for home improvement?

I’m planning to have a pool built but need to know what kind of loans there are.

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6 Responses to “What kind of loans are there for home improvement?”

  1. Omaha said:

    Home improvements are almost always financed with home equity loans, ie, a “second mortgage”, secured by the property itself.

  2. veesmom said:

    2nd mortgage or home equity
    home equity loans are usually a line of credit whereas 2nd mortgage loans are not

  3. jim_elkins said:

    The first that comes to mind is a home equity loan.
    The next is a conventional financing loan thrugh your contractor or his prefered lender.
    The third I can think of is a reverse mortgage – IF you are old enough to qualify – and IF your home is already paid for – and IF you don’t need the money for anything else (like retirement or medical reasons). Be very careful when choosing this option.

  4. Ron said:

    The best way to go is to get an equity loan as long as you have owned the house for awhile and built up equity in the house. These loans are designed for home improvements.

  5. togashiyokuni2001 said:

    First, there is the HELOC, or Home Equity Line Of Credit. It’s a second mortgage that works like a credit card. The rate is usually a function of the Prime Rate, which right now is 8.25%.

    Second is a Home Equity Installment Loan. It’s also a second mortgage, and usually the rate is lower than a HELOC, because you know how much you’re taking out.

    Third, and most economical, is to refinance your first and take cash out, assuming you don’t have a prepayment penalty that applies to your loan. The interest rates are going to be much lower than HELOC or HEIL, as much as 2-3% lower. You may end up lowering your mortgage payment, depending on how far into it you are, and what your old rate was.

  6. Jamie B said:

    You have a few options:

    1st- Refinance your existing home loan and take the cash in hand to cover the expenses you will incur. Good part is this will give you the lowest possible rate, bad part is the fees for this transaction will be significantly higher than the other types. For instance, you may be paying $5k in closing costs to borrow $20k at a lower interest rate.

    2nd- Home equity loan, this is a fully amortized 2nd mortgage where you will pay principle and interest over a fixed period of time, generally 15 to 20 years. The rate is fixed and can range anywhere from 6.5% to 10% depending on your credit score and the CLTV (combined loan to value, current balance + new balance / appraised value). There are also many options out there for no closing costs on these.

    3rd- HELOC, home equity line of credit, this is another type of 2nd mortgage. Good part is you do not have to take all the money upfront like you do in the preceeding options. You can continue to draw against this line. Bad part is this is generally an adjustable rate loan tied to prime. You usually have a draw period of 5 or 10 years where you only pay interest, after that it becomes fully amortized. You also will have annual fees associated with this, so look into that.

    The best part of the three options is the interest you pay will be tax deductable (see tax advisor). Choosing between the three should depend on numerous variables such as how soon you want this paid off, how much disposable income you currently have, and the rate and terms of your existing mortgage.

    Please feel free to contact with any additional questions.


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