Jump Start Your Remodeling with a No Equity Home Improvement Loan
Perhaps the carpet needs to be replaced, or you want to pull it out completely and lay down hardwood floors. Unfortunately, since you just bought your new home you do not have the cash to purchase the supplies or pay for someone to do the work for you. As a new home owner you do not have any equity built up in your home yet, so how do you get the financing to make the desired improvements? Is there a way to get credit for home improvements without having any equity built up in your home?
No Equity Home Improvement Loans
There is a way to finance the costs of improvements without having equity in your home, this loan is known as a No Equity Home Improvement Loan, and as the name implies, it allows you to borrow the funds necessary to do the desired repairs. This style of loan is a simple interest, fixed rate loan. These loans allow you to borrow as much as 125% of the home's current market value.
For example: If your home is worth $200,000 and your current mortgage is for that full amount then you would have the ability to borrow 25% of the current market value or up to $50,000.
Like the traditional home equity loan, the money is borrowed against your home, but unlike the traditional loan, no equity is required. Credit and debt to income ratio become the driving factors for lending considerations. Also, they are based on the idea that these loans serve as a stimulus to the economy. Since they provide work to various businesses that benefit from the home improvements, such as contractors and the home improvement stores in the area, it is this stimulus to the economy that creates the ability for these loans to exist.
Using a No Equity Home Improvement Loan for Other Purposes
While these loans are intended for home improvements, they can also be used for other purposes such as paying off high interest credit cards, college tuition, or to fund vacations. These loans can be a lifeline when people find themselves in debt and need money quickly.
Interest Rates and Payment Terms
No Equity Home Improvement Loans are due monthly with terms of a fixed simple interest rate with a fixed amortization schedule. While the interest rates for these types of loans may be several points higher than a standard home loan, these loans still offer a smart alternative to other methods of finance, and also can be a good way to reduce the compound interest rates of credit cards. Another benefit of No Equity Home Improvement Loans is the fact there are no annual fees with these loans.