Sunday, October 25, 2009

Getting Refinancing and Your Home Improvement Loan

By Henry L. Pikus

Refis, or refinancing packages, can be pretty hard to get, depending on what you want. If you have experience at this and you've done it before, it will probably be easier for you, but ultimately, your credit history is what counts; you'll have the easiest time if your credit history is good, and if you do, A-loan package deals are pretty much yours. However, if your credit history is less than stellar, you can still get pretty good interest rates even though they'll be higher with B and C loan deals. It'll take some work to find the right refinancing, but low interest rates are around right now because of the market. The process can still be pretty complicated, though. Here are some things you should have in your mind when you want to refinance so that you can obtain the money you want.

There are a couple different options in a refinance, when it is a home loan that you seek to refinance for the purpose of home improvements or cash-options, here is what you need to know. It is not as intimidating as it needs to be. Taking a "second mortgage" on your house or taking out equity matters in terms of refi option to fix up the home.

If you're looking to do some home improvement, before you start, take a look around and see what you want to do. Is what you're going to do going to make your home more valuable? How much is the remodel going to cost you -- or the addition, or the energy efficiency improvement, and so on? Once you figure out what you want, find reputable contractors in your area and get quotes from them. You could also be looking at having to repair your home because it's experienced some damage and your insurance company is going to foot the bill for it, such as if your roof has been damaged, and you want to be doing some home improvement while it's being fixed. That's a pretty big job to take on, so make sure everything is in order.

With home improvement loans, you are basically borrowing money from your house so that you can fix it up; the idea with this is that your investment is going to go into your house, but you are going to make the money back and then it's going to be shown to the bank and be used as mortgage collateral. This loan can be looked at as either a business or personal loan, but whatever you do, the idea is that you get done what you need to and your house has had the improvements necessary. Whatever you do, though, make sure the work that's done on your house increases its value. That's the whole point of this; if you don't increase your home's value with this work, it may not be worth it to take out the loan, since your improvements didn't actually make your house "better" in the long term. Lenders will take a look at this, often, as they will also look at market trends and current economic conditions before they'll approve your home improvement loan. Remember, too, that if you take the loan out and you don't do the work, and you don't do what the money was intended for, it's probably going to be very difficult for you to get another refinancing in the future if you need it.

So take a look at what you want to do and ask whether a home improvement loan is right for you, and whether refinancing solutions for that are available. If you're just fixing up your house, for example, you may be better off getting a home equity line of credit from a lender. You don't need to refinance, always, just for home-improvement needs. You can also use a personal loan for a variety of expenses that would be considered valid, such as educational purposes, paying off medical expenses, starting a family, and so on. These types of personal loans are available at the bank and through a variety of lenders; they may be something else you want to consider.

It is best to state your intentions clearly when shopping around for the best home improvement loan or refi package deal so that you are up front with the lenders you inquire with and they can lead you to the right option for you. So, talk to a bank representative or loan officer to find the right solution and make sure you do your homework first so that you can find an interest rate that is lower and even compare rate quotes with other lenders to see if they will match your offer from another lender which creates some competition among lenders.

Home improvement loans are an option in a refinancing package, they give you the option to take money out on your home's value or equity in order to make repairs and improvements, or to large scale things such as additions and remodel jobs to your home that may increase its value long term. But you need to consider the investment and make sure your home improvements increase home value, during a recession the deflation of home values and inflation of interest rates can sometimes throw this off or if you live in an location that is not growing as fast as it was a few years ago, home improvement loans do not always get approved for the fact that the home may not be worth more after doing the work and a home improvement loan should only be done if the remodel projects that you are going to conduct end up increasing the value of the home.

What does all this mean? You need to find the solution that best fits your needs and then refinance so that you can start your home improvements. To do this, talk to a lender (or several), find yourself a reputable contractor, and also seek advice from friends and family and how they have gotten home improvement loans if this is appropriate. Once you've done your homework, you may be on your way to refinancing so that you can make the improvements to your home you want and need.

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