Financing Options For Your Home Improvement Project

The cost of remodeling a house is a major factor in the whole planning process. After all, renovating is expensive, and money doesn't grow on trees. What are your options for financing home improvement projects?

The simplest way to pay for a renovation job is with cash. If you've been smart with your money and saved over the years so you can afford to improve the value and enjoyment of your home, you probably have a savings account set aside just for this purpose. Cash is the fastest and easiest way to make payments because you're in charge - there are no forms to fill out, appraisals to schedule, and no waiting. The one negative point is the fact that spending the money means it won't be earning you interest anymore and the expenses associated with the project aren't tax deductible. But with new equity in your home and freedom from loan and interest payments, cash is always a good option.

But what if you're like most people, and don't have the cash available right now? What can you do to access the necessary funds? If you're in this situation, a home improvement loan may be the right solution for you. The Federal Housing Administration (FHA) provides 2 loans designed specifically for home improvement. The Title I loan lets you borrow a maximum of $25,000 for a single family dwelling at a fixed rate. The FHA even provides insurance against risk of default. How do you go about obtaining such a loan? It's quite simple - just apply through an approved lender and you'll be on your way to financing your dream.

The second option is the Section 203(k) loan designed especially for a fixer-upper. In order to help you purchase and improve the property, these loans come in the form of a single, long-term, fixed or adjustable rate loan. Again, simply apply through an FHA-approved lending company to gain access to this type of loan.

Lastly, you can use the value of your home to your advantage. A home equity line of credit is a form of revolving credit that uses your home as collateral. This type of loan usually offers you up to 75-80% of the appraised value of your house minus the balance of your mortgage. Other factors are also taken into consideration, such as your credit history and ability to pay back the loan. These loans tend to carry a variable interest rate. Once you're approved, you can go ahead and use the funds for whatever project touches your fancy. It's a very convenient way for most homeowners to finance home improvement projects.

Find a local Building contractor.
View more Building articles.