Home Improvement Financing

Home improvement financing may be one of the few ways that it is smart to borrow money for anything other than a place of residence, particularly for those who are a bit on the fiscally challenged side of things. After all, even the United States government is now challenging and encouraging all citizens to start saving instead of buying unneeded or unnecessary items so easily put on plastic in the past. So if there is an accepted time to borrow money, particular kinds of home improvements may be a good reason to borrow money. But even if home improvements are a more acceptable reason to borrow, both the reason for the credit and what part of the house is being improved must be well thought out. A good place to start is to decide what home improvements are most likely to bring about a good return on the investment.

Let's start with an in ground swimming pool. The answer is no and don't ask again. See, that wasn't hard at all because of all the home improvement financing ideas someone might come up with, the pool thing is a real loser. A person quite easily might not get a dime out of the thousands of dollars that are needed to put an in ground pool in a back yard, especially in the Midwest and eastern half of the country. In fact, many people might avoid buying a house with a pool because of all the expense and service associated with having such a responsibility.

The two places where it can pay off in terms of resale value for the house are the kitchen and bathroom. The return on investment for a kitchen is about ninety percent in most cases and while the cost may be upwards of ten thousand dollars or more, having an updated kitchen makes a house much easier to sell. Home improvement financing for the kitchen might cover such items as tile flooring, new energy efficient appliances and new draw fronts. The bathroom is another high return on investment consideration, while just a little lower (85%) on investment return than a kitchen, a remodeled bathroom will appeal not only the current residents but also those who will be looking at it when it comes on the market. Double sinks, tile floors and new bath tubs and fixtures are a good choice when choosing what to tackle in the bathroom remodeling project. Other good investments with a little lower return might be adding a second bathroom, installing a fireplace, adding a deck or patio and replacing old doors and installing ceiling fans as well as replacing old furnaces and air conditioning units.

So what about home improvement financing? Of course it goes without saying that the best way for home improvement financing is paying for them with cash. But since seventy percent of all Americans live paycheck to paycheck, it is more likely that some sort of lending agreement will have to be struck with a lending institution or company to make any home improvement project possible. And since a bank has the lowest interest rates on average, a person wishing to remodel should start at his/her local banking institution. A bank will most likely want to provide a home equity loan for the customer, which means a certain percentage of the equity in someone's house will be used for collateral in the lending agreement. That percentage may be any amount, and each bank is different. Understand that even if a person is a regular customer, a credit score of at 640 and a debt to income ratio that is fairly low will also be required for the agreement to be sealed at a bank, but the advantage of a home equity loan is the fact that the interest on the lending agreement may be deductible at tax season time..

A credit union might also be a good place to seek out home improvement financing. A credit union is usually a little less stiff in the requirements for a loan to be approved and usually take customers' individual situation into account as well as a credit history, so there might be a better chance of securing a loan agreement at a credit union. But what happens if a credit score is fairly low and there are some late payments on the borrowing history of the customer? There is another alternative for home improvement financing that may be more costly, but make the dream of remodeling more viable. This option is a signature loan.

A signature loan is usually a lending agreement offered at one of the many local and national lending companies usually located in strip malls across the United States. These companies handle mid to lower averaged credit scores and debt to income ratios are somewhat less important. The reason for this is the fact that these companies are backed by investors that choose to take higher risks with more questionable borrowers on the promise of a much higher rate of return on their money due to inflated interest percentages on the lending agreements. Home improvement financing with a signature loan may reduce the positive return on a kitchen or bathroom remodel by as much as ten percent or more because of the higher interest rates paid on the lending agreement. Making a wise decision about how to pay for needed home improvements takes some time and sound judgment before taking the plunge. "And the disciples were astonished at his words. But Jesus answereth again and saith unto them, 'Children, how hard it is for them that trust in riches to enter into the kingdom of God!'" (Mark 10:24)

Add to: File Insurance Business article Teen Photo Images