Finance Tool

When a home needs some maintenance work carried out, an ideal way to ensure this can be achieved is by arranging a remodeling program, providing you can raise the finance; unless you have a large sum of money in savings you will need to arrange a home improvement loan. Not many homeowners have the confidence to attempt home improvements on their own so they need the services of tradesmen which are a costly part of the plan.

Not every owner will want to have a secured loan as it is based on the equity available, but zero equity home improvement loans are readily available. A loan that does not require equity allows new homeowners to apply even if they just bought their home. Fortunately for the homeowner, a non-equity based financing arrangement is available with a fifteen year repayment term if required.

There are, however county limits on how much money can be borrowed when it is for no equity finance and a lower limit imposed by the lenders which takes into account the joint income of both owners. Certain facts are researched by the lenders; like the type of property and reasons for the loan but essentially, this type of loan is easy to arrange with only a small amount of documentation to complete.

The difference with a secured home improvement loan means the value of the property is taken into account so when there is spare equity, the loan is basically taken out of this. Equity based loans are arranged quite quickly and whilst these loans are not considered as second mortgages, they have the benefit of lower interest rates and preferential terms as part of the arrangement.

This is not an open ended finance agreement and a valuation of your property will be required for a secured loan to be arranged. Although the value of your home is required, it will also take into account how much you owe both on the house and personally.

The next stage is to factor in all this information before a final figure the lender is prepared to agree upon is put before the homeowner. It is never a good idea to lend more than the property is worth although a few lenders do, which often causes problems if property prices fall; fortunately most will only lend to the top value of the property.

Because you are lending money against your home, it is important that you borrow carefully and you do not overextend yourself or you will be putting your house at risk. Home improvement loans can be a wonderful way to tidy up an aging home but remember that they need to be paid off and if you are likely to struggle, reduce the amount you want to borrow.

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