It’s no secret that it’s a seller’s market right now. Supply levels have been at an all-time low with less inventory available across the country. However, with interest rates also at an all-time lows, the demand to buy has been soaring. The result is a market in which intense bidding wars are the norm, and in which home prices are up more than 23% from the same time last year. And while selling your home during this time might result in higher profits than you expected, it’s proving difficult to secure a new home; especially if you’re trying not to spend every penny you made from selling. Instead, it might be the right time to consider a home improvement loan and work on the home you already have.
Just because it might not be a good time to shop for a new house, doesn’t mean you can’t “upgrade.” With our home improvement loan rates starting at 9.9%, you could finally afford that kitchen renovation or home addition you’ve been dreaming of. With lumber rates starting to return to normal, it might be the right time to consider investing in your current home instead of shopping in this competitive market. And your home improvement loan will be paid off long before that new mortgage would be. Your loan interest rate also won’t change part way through, but the mortgage rate on a new home could change drastically at your renewal date.
What Is a Home Improvement Loan?
Home improvement loans are precisely what they sound like — loans you can use to improve your home and, hopefully, increase its value. Most of these loans are unsecured, meaning you don’t have to put down collateral to receive funds. You can generally borrow between $1,000 and $100,000 without having to worry about losing your home, vehicle or other assets if you default.
A loan for your home is a type of personal loan. As such, you can generally find financing through a traditional bank, credit union or online lender. If you want to get really creative, you can probably find a peer-to-peer lender who is willing to back your remodeling project.
Like any personal loan, an improvement loan comes with a fixed interest rate and requires you to pay fixed monthly payments for a predetermined period. Terms on improvement loans can range from one to 15 years.
Types of Loans for Your Home
There are three main types of loans you can use to fund home improvement projects. Each comes with pros and cons:
- Home Equity Line of Credit: HELOCs are great for homeowners who have or plan to start extensive and ongoing renovations. With a HELOC, you borrow against your home as you need credit and repay it when you can. The balance is revolving, meaning you can continually access credit without having to reapply.
- Home Equity Loan: A home equity loan is ideal if you have just one or two projects you need to complete. You borrow a lump sum against your home and get five to 30 years to repay it. While this option often boasts low interest rates, bear in mind that if you miss a payment, the bank may foreclose on your home.
- Personal Loan: A personal loan grants you the most freedom for how you may use the funds. It also comes with the least amount of risk, as you generally will not have to put your home up as collateral. However, because they are unsecured, personal loans generally have shorter repayment periods and higher interest rates than HELOCs or home equity loans.
To decide which type of financing is best for you, determine how you plan to use the funds and for how many projects. Also, write up a repayment plan, and be sure to choose a loan that offers terms you can easily meet.
Ways To Use a Home Improvement Loan
Regardless of the type of loan you choose, you can enjoy ample flexibility with the financing, as most loans give you the freedom to make any improvements or repairs to your home. Some common uses for home improvement loans are as follows:
- Bathroom upgrades or additions
- Kitchen remodels
- Foundation repairs
- Repairs to the roof or siding
- Deck or patio additions
- New flooring or cabinet installations
- Window replacements or upgrades
If you can envision an upgrade, a loan for your home can probably fund it.
Your Dream Home Is a Possibility With a Home Improvement Loan
Once upon a time, you may have envisioned selling your starter home and upgrading to your dream home. However, with a sizzling market that has no end in sight, selling may not be an option. However, that does not mean your dream home is out of reach. Rather, it means you may have to get creative in how you obtain it. A home improvement loan can help you out. To find and get approved for an affordable loan within minutes, give our loan search engine a try.
