Home Improvement Loans Offer Convenience

Home improvement loans are consumer loans used to finance structural renovations, remodeling projects, or home alterations on an existing dwelling. Also known as a second mortgage or home equity loan, they are secured by the equity on the existing mortgage.

Benefits of a Home Improvement Loan

While the needs of a home improvement loan may be personal, there a good reasons to secure a second mortgage:

  • A home improvement loan can provide tax deductible interest like an existing mortgage for either a remodeling project or specific improvements. It is important to consult a tax advisor first.
  • The improvements can increase the value of the home or resale value, in addition to the increased comfort and function.
  • The home owner can choose their own contractor, and make the improvements on their own time frame.

Home Improvement Loan Terms

Home Improvement loans are similar to a mortgage, in that the terms and financing typically work the same. The equity in the existing mortgage will vary with lenders, some offering loans as high as 95% loan to value.

This type of second mortgage can offer 15 or 30 year rates. Long term fixed rates can make it easier to pay off the mortgage over an extended period.

As an alternative to a larger second mortgage, there is an option of using a line of credit. This benefits the person wanting to borrow smaller amounts for home improvements and then paying the loan back in less than 15 years. This loan may have a variable rate that can rise.