Your home will probably be your biggest investment, and it pays to renovate it in order to increase its value and make it more attractive, environmentally friendly, and energy-saving. Perhaps the home improvement loans will be your first consideration when thinking about renovating your home. It is equally important to think outside of the traditional bank loans when financing your home remodeling, the reason being that there are other loan sources that are much better with lower interest rates.
The Mortgage refinance option
Mortgage refinance option is one of the most suitable home remodeling refinancing options out there. If you discover that the interest rates of your preferred loan are higher than the current market rates, you may want to switch to this type of loan in order to lower interest rates as well as the monthly repayments. You may also want to consider a cash-out refinancing if you want to take advantage of your home’s equity. In this case, your lender will allow you borrow a loan that is enough to pay off your mortgage and at the same time, allow you to take up more cash (up to 80% of renovation cost), to remodel your home. It is important to think about this loan and make sure you can repay the loan on time because your home may be the acceptable collateral.
The Home Equity Loan
The home equity loan is faster than loans obtained in the bank. Similarly, the Home equity loan usually attracts lower interest rates. This type of loan is one of the best ways of taking advantage of your equity without refinancing. Instead of opening a line of credit for yourself in order to get a loan to remodel your home, you will get a lump sum from your lender. You should probably consider this type of loan if it comes with a low-interest rate. You should keep in mind that interest rates on the second mortgage with this type of loan can be higher because of the cash-out refinance benefit you are getting. Be ready to repay this interest rate.
Personal loans
Personal loans should only be taken in cases of emergencies. There are lots of personal loan providers out there, you just have to be careful when agreeing to terms of the loan repayment. Personal loans are faster than loans from traditional banks because there are no paper works involved and interest rates can be very much low. You don’t have to put up your home as the collateral here, but there may be a shorter time to repay your loan under this agreement. The lump sum you can get may be lower, and you may have to repay the loan between 5 and 7 years. Taking a personal loan will be an ideal option to refinance your home renovation if you can repay within a shorter period. One of the advantages of personal loans is that you can borrower smaller amounts which means you can repay within a shorter space of time.
The Transfer cards
These options of home renovation loans are most suitable for smaller projects. Opening up this line of the loan will help you make payments for smaller home renovation, purchase of new appliances and even home improvement components such as plumbing, roof, and furniture. When you spend cash along with this loan, you may qualify for some cash back benefits, and some service providers may offer 0% APR on all the purchases you made, and you may also qualify for an interest-free on certain purchases if you repay the loan within 12 months. With this type of loan, you want to ensure that you make repayments as soon as you can to avoid paying higher interest rates.
Direct hand to hand loans
If you know a family member, work associate or someone who has the financial strength to fund your home renovation, then this could be your best alternative. Depending on how close you are to the individual, these types of home renovation loans usually don’t attract interest rates, and you can repay the money within an agreed period of time.
In some cases, hand-to-hand loans may become problematic, if you find it difficult to repay on time, the lender may have to use force by reporting yours to security agencies. In some cases, you may have to face litigation when you default in repaying such loans and such court cases will cost you some money. For these reasons, you should only take up these types of loans when you are sure of your ability to repay on time. Just like most types of personal loans, hand-to-hand direct loans are faster than loans from banks because there are no paper works involved and you wouldn’t have to provide collateral.
Variable interest home renovation loans
Most of the other types home renovation loans, including Home equity and Mortgage refinance, do come with fixed interest rates. The variable interest rate home renovation loan comes with variable interest rates. You can take up these types of loans from community lending organizations that are backed by the government. Though these types of lenders are not very common when compared to other types of lenders, they offer much lower interest rates than the banks, despite the variable interest rates.
Conclusion
Perhaps the most important step you should take when taking up a home renovation loan is to shop around before making the final choice. Some Mortgage refinances and Home equity loan providers may offer low-interest rates but you may end up paying certain fees, especially when you extend your repayment duration or when you default in your regular payment. On the long run, hidden fees and charges may add up quickly and force you to repay more than you have planned for. You may want to do some research online and ask certain individuals who have used the mortgage refinance or home equity loan services of certain service providers, in order to make an informed choice at the end.