If you are planning or wish you could redesign your property, maybe adding a new floor, making the kitchen new, etc., you’ll be able to obtain the funds needed to do so by applying for a home improvement loan. Home improvement loans are not hard to get and are the perfect source of funds for this kind of project.
Home redesigning can be really expensive but if you can obtain financing, things can get easier. Thus, in order to face the expenses that a home redesign project implies, home improvement loans come in very handy. Learn how to obtain these loans and what you can expect of loan qualification and loan conditions.
There are home improvement loans and most of them are secured loans. Thus, the loan purpose is a requirement for approval as it has to do with the property being used as guarantee. That being said, many lenders will require you to show documentation backing up the claim that the money will be used for home improvements.
This is due to the fact that these loans have very advantageous terms because the lender knows that the money will be used to improve the property that is being used as collateral for the loan and thus raising the value of their guarantee. The loan purpose is essential, otherwise, the lender would offer less advantageous terms.
Home Improvement Loans
Most home improvement loans are, as explained above, secured loans. The main financial tool used for home improvement is the home equity loan. These loans provide funding against the equity you’ve left on your property and have similarly advantageous terms as home mortgage loans.
Equity is the difference between the value of the property used as collateral and the amount of outstanding debt already secured by it. For example: given a $100,000 property, if the mortgage balance on it is around $70,000, then the amount of available equity reaches $30,000. However, usually you can only get funds up to 85% of the property’s market value with the mortgage and home equity loan combined. Thus, in the above example, chances are that you won’t be able to obtain $30,000 but $15,000 instead.
Qualification and Loan Terms
Getting approved for a home equity loan for home improvements is not that complicated. There are home equity loans specially designed for the funds to be used for home improvements and these loans have even more advantageous terms than regular home equity loans. Provided that you have sufficient equity available on your home and that your home improvement project is approved by a professional, there are not many credit or income requirements that may be an obstacle for approval.
Getting approved for an unsecured home improvement loan is a bit more difficult. There is not such an important offer of unsecured home improvement loans compared to home improvement loans based on equity and thus, it is harder to qualify for them. Your credit score and history may be an issue and your available income will be thoroughly analyzed by the lender in order to make sure that you’ll be able to afford the monthly payments.