Your Remodeling Finance Options

If you are beginning to make plans for remodeling, one of the major decisions you will need to make is how to finance the project. The most popular word of advice from bankers is to go talk to your own banker, and get a pre-qualifying loan so you will know ahead of time how much you can spend, and how much your payments will be.

However, before you go waltzing through the doors of your banker, you need a plan. Obtain some bids on the work you would like done, and arrive at a ballpark figure of how much the entire project will cost.

There are a couple of different options for loans. One is a Home Equity Loan (sometimes referred to as a second mortgage) that will offer a fixed rate or variable rate of interest. A fixed rate is one in which monthly payments are made, however, the interest rate is fixed.

A variable rate of interest is one in which the amount of your payments will go up and down according to the interest rates at the time.

If you are already making payments on your home or car, and you feel you cannot handle another separate payment for a remodeling job, you do have an option. You may be able to have your Home Equity Loan and your original mortgage combined so you will still only have two loan payments to make each month.

Another popular option is the Home Equity Line of Credit. This type of loan is a little more flexible. The major benefit is that you only pay interest on what you use as you draw from this line of credit. They are quite popular with those interested in projects such as remodeling. The downside of this loan is that the interest rates are variable. Which means that the payment rates go up or down according to the prime interest rates.

For most loans from a bank, you are usually required to have equity in your home. If you do not have any equity, there are still a couple of options. You can try applying through your state Housing and Development Authority, or you may also see if there are any community home improvements programs available. Some of these loans require no equity, and may loan up to 15,000 for those in need of making necessary improvements. In addition, the interest rates are quite reasonable.

Therefore, if you feel a need for some home improvement, do the necessary homework and then go visit the office of your banker. Chances are he or she will work with you.