Home Equity Loans, Lines of Credit and More: Funding Your Remodeling Project

by LAURA

Summer is the perfect time to start working on a home repair or remodeling project. If you’re building something major, like a new bathroom, deck or storm shelter, you’ll probably need some extra money to get the job done. You have a variety of financing options to choose from, but when it comes to loans, one size doesn’t fit all. A home equity loan might be perfect for your neighbor, for example, but you might be better off with an FHA Title 1 loan. A home equity line of credit might be better for an ongoing project, but not a new pool.

Find the Right Loan for Your Project

The specific details of your project, the length of time you’ve owned your home, where you live, and how much money you make can all be factors in determining what sort of financing will work best for you. Here’s an overview of the most popular types of loans for financing home improvement projects, and some great examples of where to get them.

Home Equity Loans and Lines of Credit

Both a home equity loan and a home equity line of credit (HELOC) allow you to use your house as collateral. For many people, their home is their biggest asset, so this is one of the easiest ways for them to get a large amount of money to fund a major expense, like a remodel. What’s the difference between a loan and a line of credit? A home equity loan pays you a lump sum of money up front, while a HELOC is a bit more complicated. You’re approved for a total loan amount, but you withdraw money as you need it, and you only pay interest on the amount you’ve taken out. For most people, a home equity loan is a better choice for financing a remodel, as it gives you access to all the money you need up front. A HELOC is typically used for an emergency line of credit, not a large, one-time purchase.

Where to Get One                                                                        

Most organizations that offer mortgages will also offer home equity products. You don’t need to apply for one with your mortgage lender, although it’s worth asking them, since they might cut you a deal for being a repeat customer. Credit unions have a great reputation for offering low home equity rates and flexible programs. For example, a home equity loan from Solarity Credit Union in Yakima, Washington, can help you pay for a renovation of an existing home, a second home, or even a mobile home. If you get a home equity loan from Day Air Credit Union in Kettering, Ohio, they’ll even help you finance the closing costs.

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