The
purpose of the home improvement loan
The home
improvement loan is designed for exactly that – to make
improvements to the home. This can mean a wide range of
things. Some examples of projects completed with the
money obtained from a home improvement loan
include:
• Adding or
enlarging a room
• Building a deck
• Enclosing a
patio
• Funding a swimming pool
• General
repairs
• Repainting and redecorating
• Updating
plumbing
The home financing
situation
The interest rate, total loan amount and
length of loan life are going to be dependent upon the
lending institution and the current real estate market.
They will also depend upon the details of the first
mortgage, the exact purpose of the home improvement
loan, borrower credit history and the value of the home.
In general, the home improvement loan is a short-term
loan which requires only interest-only payments during
the period of home construction. The interest rates are
usually lower than those of a private loan such as a
line of credit but vary according to all of the above
factors.
Using the home to profit from the home
The home improvement loan uses the home as
equity for financing of the loan. With proper repayment
of the home improvement loan, it is actually possible to
profit off of the loan. This works when the value of the
home improvement in terms of the rental or real estate
market brings in more money than the total cost of the
loan to the borrower. Because real estate market values
frequently rise, this is often the case with a good home
improvement loan.
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