Home improvement loans.

[Dan208]

My wife and I are needing to do some MAJOR home remodeling in the near future. New heating/air condition unit, new windows, probably new roof, new bathroom....you get the idea.

Anyway, does anyone here have any experience with getting a loan for home improvements? Basically, I need to know what we should be looking for in a loan, and anything that we should avoid. We live in a small town (about 3000 people). Should I check with one of the local banks first and see what they can offer?

[Gingeriffik]

First you should look into a Home Equity loan. Most likely to be the best rate for the amount you would be looking at. I think the next best option, if you do not have enouth equity in your home, would be a secured line of credit. This is an open line of credit which uses your house as collateral. When you have paid for all cost, the line should be convertable into a 2nd mortgage.

[mhuck123]

It depends on the type and extent of the remodel/repairs you are going to do. Since I own a real estate and mortgage company I deal with this somewhat often. The previous advice given on the forum is good, a home equity line or convertable secured line of credit is good. You can also look into a construction loan as well depending on the extent. If you have a lot to do (let's say over 50K) or the habitability of the home is at risk then this loan may be better for a few reasons. First a construction loan usually has a short 1 year or less minimum or no payment window. Basicall as you are building you are not making payments. The reason is like a convertable loan, they want to switch it to a home equity line of credit or have you get one to pay them off. You obviously need good (760+) credit and a perfect mortgage history over the last 36 months to do this. This can relieve some stress of the payment.

If it is less or minor then you can just get an equity line and do the repairs at your leisure. Also with a home equity line you can do as much work yourself as you like; many construction loans allow ONLY licensed contractors to do the work.

Hope that helps!

[Dan208]

Thanks for the advice. We've been in our house for almost 10 years and have excellent credit (not sure of our score, but my wife knows what it is) and have never had a late mortgage payment.

I'm not sure how much we'd be spending. I know around $6000 for the heating/air unit, but I'm not sure about the rest of the stuff. I plan on getting some quotes here in the next few months.