Financing home improvements with a second or third mortgage allows you to maintain or increase the value of your home. With home equity loans secured by the value of your property, mortgage rates are relatively low. Additionally, tax laws also allow you to deduct second mortgage interest in some cases.
But before you sign on your new loan, make sure you get the right type of financing for your project. Also, take the time to shop around for lenders with low rates and fees.
Start with a home improvement budget first
Before seeking financing for your home repairs or remodeling projects, create a realistic budget with estimated cost overruns. This is the time to collect project quotes from at least three contractors. Or if you plan to do the work yourself, price materials and fees for rental equipment.
For projects under $2,000, check out a home equity line of credit. This type of financing generally has no application fees and low adjustable rates for the first few years. Lines of credit also give you flexibility in how you use your principal, so you only pay interest on what you borrow, when you borrow it.
If your projects are larger, a closed second or third mortgage will provide you with better long-term rates. With a longer period to repay your loan, you’ll also likely recoup the cost of closing fees with a low fixed rate.
Take advantage of online quotes
Once you’ve selected the type of financing you want, compare rates and fees to determine the best deal. With online lenders, you can quickly research rates from their websites. You can even request personalized quotes based on your credit score and financial assets.
When you allow financial companies to access your credit report, you have a 30-day grace period in which repeated inquiries don’t affect your score. After that, your score will be temporarily lower. Therefore, only request quotes if you are serious about applying for financing.
Securing financing for your home improvement projects typically takes less than two weeks with most loan companies. With today’s online lenders, paying for your home renovations will be the easiest part of your project.