As a homeowner, there will always come a time when your property needs some significant work. This could be a few years after the house was built or as soon as you buy the property from a previous owner. Your main concern is bound to be how you are going to finance the work.

There are options available to finance your home repairs that mean you won’t have to make too many sacrifices in your lifestyle and personal expenses. You could look at taking out a mortgage if you own your home outright, or if you already have mortgage arrangement, you could look into a home equity loan.

If you decide to take out a mortgage, you can choose between a fixed or variable interest rate. The first is less risky as the interest rate will remain the same for the entire life of the loan. However, if interest rates are particularly high when you take out your mortgage and are likely to decrease, you might want to consider a flexible rate, which will change with shifts in the overall economy.

Think carefully about how long you are likely to remain in the property to determine the amount and loan period. If you can take a larger sum than you require for your home improvements, you can invest some for potential later repairs or improvements. Whatever mortgage you choose, your initial payments will be mainly interest, with the proportion of capital increasing as time passes. You can choose only to pay interest in the first year or two to reduce your initial outgoings.

A home equity loan will be based on the amount of capital you actually have in your home. This can be seen as the value of your home minus the capital amount you still owe on your mortgage. A lender will also look at your credit history and status. If you have sufficient equity in your home, and good credit, it should be simple to apply for a home equity loan. Interest rates are low as lenders are taking very little risk, and they believe that the home improvements the loan is financing will add to the value of the property.

You should shop around and get a number of quotes to compare when you are taking out a mortgage or home equity loan. Remember to include your regular bank, as being an existing customer can have advantages and qualify you for rates and offers you will not get with a new provider.

Although some home repair projects are unavoidable, many home improvements are not entirely essential. You should always balance how much you will be spending on a project including the interest on the loan, with the benefit you will get in terms of increased property value and quality of life. A loan may seem a large commitment, but if the home improvement project will add greatly to the value of your property the long term investment may be worth it.


By: Clinton N. Maxwell

Tags: Credit History, Economy, finance, Home Equity Loan, Home Improvements, Home Repairs, Initial Payments, Invest, Lenders, Lifestyle, Loan Interest Rates, Loan Period, Mortgage Lender, Mortgage Payments, Outgoings, Personal Expenses, Proportion, Risk, Sacrifices, Variable Interest Rate