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How remodeling construction loans work

April 12, 2008
Remodeling areas of your home usually requires a large input of money, something most of us do not have; home improvement loans are an ideal way to carry out necessary maintenance and remodeling. If you want a first rate home improvement job carried out with a guarantee then you will need to use professional tradesmen who should also speed the work up a great deal.

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. The last responsibility a new homeowner wants is that of it being used as equity for a loan to improve it. Finance which is used to improve the home is seen as a good investment in the property and even if equity in the property is not required, the loans can be organized for up to 15 years at a time.

However, one stipulation for a zero equity finance arrangement is that the combined income of the owners reaches a specified limit but it must not be greater than the limit imposed by the county where they live. Although a number of details of the applicant are looked into, these loans are relatively easy to arrange and there is not much documentation to complete.

A secured home improvement loan allows you to access some of the equity in your home, so that you can take out a loan against your property. The upside to this type of secured loan is it's available at more favorable rates of interest but is not arranged as a second mortgage on the property.

This is not an open ended finance agreement and a valuation of your property will be required for a secured loan to be arranged. This calculation is worked out using how much your home is worth, how much is owed, and of course if there are other loans or debts, as these will be included in the calculation.

The lenders will assess all this information before furnishing the homeowner with the amount they are prepared to lend them. 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.

Over extending your ability to pay is the quickest way for a person to lose their home when they cannot keep up the repayments. It is never a good idea to borrow more than you can afford to repay, no matter how noble the cause so if your home improvement loan will cause financial hardship, restrict it to cover just essential maintenance.