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Home Improvement Loans – Benefits to a Home Equity Loan 2nd Mortgage

May 26th, 2006

Home Improvement Loans – Benefits to a Home Equity Loan 2nd Mortgage

Everything and the Kitchen Sink
Remodeling Book

You decided to fix up the house, remodel the kitchen, put a new floor down and maybe even get your house painted.  You really would like to get the job done as it is way over due and you don’t have enough funds set aside to pay for the improvements.  What you can do is get a home improvement loan which is a 2nd mortgage that will fund the project.

You will find there are many different lenders available that offer different terms and interest rates.  You need to know how much the improvements are going to cost.  You will need to get some estimates by the contractors that you anticipate hiring.  A written quote is the most valuable as this number will be valid for the time specified.  Knowing how much the improvements will cost will be the first step to getting the loan.  You probably will want to add a little bit extra to the quote price, as construction costs can go over the quote price sometimes.


Figure out how much the monthly payment can be for paying the loan back.  If you can pay more each month you can go with a shorter loan period.  If you are looking for lower payments then you will want to stretch out your payments as long as you can.  If you are able to find a 30 year fixed rate 2nd mortgage you would get the lowest monthly payment.

You could finance your home improvements by paying with credit cards.  This may be ok in some circumstances, but you need to ask yourself how long it will take to pay off the home improvements.  If it is going to take more than one year then you will probably be better off with a home equity loan.  By getting a home equity loan the interest paid are tax deductible.  Any interest paid on personal credit cards are not tax deductible at this time.  You may be able to get a promotional no interest credit card offer, but it will eventually expire and the interest rate is much higher than a home equity loan.

A home equity loan is a specified dollar amount paid out at one time.  You usually have a fixed interest rate and you have on average 10 – 15 years to pay the loan back.  By getting a single loan and not an open line of credit on your home, you will not have to worry about variable interest rates and incurring more debt.  Your monthly payments will be at a fixed dollar amount as well.


Shopping around for a home equity loan is beneficial because it will allow you to get the lowest rate interest as well as the pay back duration that best fits your needs.  You can use an online loan broker service such as eLoan, Lending Tree that will shop around for you in a short period of time.  You could contact the banks directly but it will be more time and work involved to accomplish what the loan broker is able to do quickly.

While the adjustable rate or interest only loans entice you with lower rates and lower monthly payments, you are probably better off with the fixed rate loans.  If interest rates go up, so does your monthly payment and amount of interest you pay.  Currently interest rates are climbing slowly, so it probably is not likely that they will be going down any time soon.   The goal is to pay off the loan in a specified time period or sooner if possible.


The best part of a home improvement loan is that you have added value back to your home.  Maintaining your home and keeping it in great condition will add value for years to come.  Whether it is landscaping, roofing, an addition, or a kitchen remodel, a home improvement loan is one way to finance your project.

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Nicole Wilson
Best Syndication

Home Improvement

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