You can get a secured loan for home improvements by using the value of your home as collateral. In fact, it is now a common way for people to get money to fix up their homes and make some of their dreams come true. Not every home project will work if you want to get the most value out of your equity. Here's how to get the equity you need to make the improvements that will make your home more valuable.
If you have lived in your home for a few years, you probably have some equity in it. Two of the most common ways to get that money are to refinance your first mortgage and get a cash-out mortgage, or to get a second mortgage with a home equity loan or a home equity line of credit.
What's best for you will depend on what you're going through. The interest rate on a first mortgage is usually lower than that on a second mortgage, and if you have an adjustable rate mortgage now, you may want to refinance and switch to a stable fixed rate mortgage. On the other hand, you might only need enough money for your project and be able to afford a second mortgage payment. Then, you should definitely think about getting a home equity line of credit, which lets you take out only what you need and only pay interest on that amount.
The best thing about a home loan that makes your home worth more is that the money you use to do it is also tax-deductible. This means that you are actually paying less than the interest rate you are given. Plus, if you do the right projects, your home's value goes up.
You can do whatever you want with the money you get from your home's equity, but the best thing to do is to put at least some of it back into your home. There are also some things you can do now that will give you the best return in terms of your home's value. They might not be what you think they are. Some of these things are making high-tech changes to your kitchen or bathroom, putting siding on your house, or adding on something like a bedroom.
Do your research before signing up for the first home loan you find. There are some cons out there, and you'll need to know what to look out for to stay away from them. Use mortgage calculators to figure out how much it will really cost over time, and get several quotes to compare. Watch out for any fees for paying off the loan early.
You also want to stay away from private mortgage insurance. If you are refinancing your first mortgage, you can avoid this by not borrowing more than 80% of your home's value.
Lastly, you should check to see if the value of homes in your area is going up or down before you get a secured home loan. This will tell you if you can expect to get back at least some of your money when you sell the house. Talking to a Realtor in your area will tell you this. If homes around you are losing value, you might want to think twice.
