How to Decide if Home Improvement Loans are Right for You

How to Decide if Home Improvement Loans are Right for You

Posted by Dan Moyle on Wed, May 23, 2012

Let's be clear: home improvement loans aren't for everyone. If you're looking to remodel a kitchen, then it may be the best option for financing the work. But if you're planting a few trees and painting a home office, then you'll probably want to avoid the work of a renovation loan. But how do you know if financing is the way to go? Let's take a look at how to decide if home improvement loans are right for you and your remodeling needs.

This financing option allows the home buyer or homeowner to roll the cost of repairs - minor or major - into the mortgage on the house. This means you're paying the same interest rate as your house payment instead of a credit card or store credit rate. It also means the cost of the upgrading is amortized over the life of the loan. This makes expensive home improvements much more affordable in monthly payments that add value to the home price.

All of this is great if you're planning to remodel the kitchen or add a bathroom or replace old windows. But what if you're just re-painting a room? Many small projects you can do yourself or hire a professional for a weekend. In this case, refinancing your house into a home improvement loan is a bit much. Maybe you can get an unsecured loan from your credit union or bank, or better yet you may have the cash in savings. That's a better way to go.

When your list of upgrades begins to get as long as your arm, then it's time to consider a bit more help than a savings account or holding a garage sale to come up with the money. Home improvement loans can help finance projects like kitchen remodeling (including new appliances), carpet replacement or other flooring, an entire house re-painting, roof repair, basement waterproofing & finishing...the list goes on and on.

If you don't mind the paperwork it takes to refinance your house, and you have 3.5% of the entire budget as a down payment then financing the projects with a loan like the FHA 203k is a possible solution. If you're buying the house then doing so with the 203k isn't that much different than a standard FHA loan. Either way, rolling the cost of making the house your dream home is possible with home improvement financing. If you'd rather do the work yourself and put in "sweat equity," then you'll want to go with a standard mortgage loan or avoid refinancing your house. That's the simple answer to the FHA 203k vs DIY question.

A community mortgage lender should be interested in keeping you in a mortgage you can afford and that makes sense for your house. Don't let someone talk you into more house than you can afford, or financing you don't really need. A renovation loan is one option out there, but it's not for everyone.

One final step in deciding if it's for you is to download "The Complete Guide to Spring Home Improvement Financing" at the button below. The free eBook looks at other ideas for sprucing up your home this spring and summer, and whether you might need financing help. Get your free copy today and start planning your home improvement projects.

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