Most people who want to finance a home improvement project apply to their bank for a home equity loan. Like a mortgage, a home equity loan uses your house as collateral for the loan which is often based on the projected value of the house after the renovations are completed. How much you can borrow will also depend on how much of your first mortgage you have remaining.

Your interest rate for a home equity loan will depend on your credit score, your lender, the value of your equity and the going or prime interest rate. Often for home equity loans that are targeted specifically toward home improvement projects, your lender will ask to see a full plan of your home improvement project along with a budget and estimated timeline. This way, the lender can not only gauge the value of the property after the renovations, but also get a clear grasp of the required budget. Remember, when making your budget, always add a 10-20% buffer to allow for delays, weather problems or unexpectedly higher supply costs.

This entry was posted on March 26, 2008 at 3:34 am and is filed under Home Improverment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.