Home Improvement Loan 101
Homeowners who need to make necessary changes to their homes may consider applying for a home improvement loan. When a home is refinanced, a new mortgage is created. In some cases, this additional mortgage can be beneficial to the proprietor, especially if the first one carries a high or adjustable interest rate. Thus, homeowners obtain a loan with better interest rates and get a lump sum of money to pay for home repairs.
Home improvement loans are also great alternatives to using cash for home repairs as the interest on such loans is tax deductible. Repairs covered under these loans include structural improvements. Some loans also allow for the building of tool sheds and the purchase of fire safety equipment.
Likewise, homeowners need to have a satisfactory credit rating to qualify.
It might be more difficult for individuals with bad credit rating to receive a home equity loan. Apart from credit scores, lenders also determine creditworthiness from credit history. Sometimes, several lenders will grant home improvement loans to bad credit holders. However, such homeowners need to provide sufficient equity.
The most common form of a Michigan home improvement loan is called secured. This guarantees financial institutions the repayment of the loan with collateral. The collateral includes anything of worth such as the home itself or other valuable properties. If the borrower defaults on the loan, this allows the lender to place a lien or claim to the property on the collateral. The person or institution holding the line is the first entity to receive monies from the sale of the collateral.
A secured home improvement loan has advantages over a non-secured one. For instance, because unsecured home improvement loans are solely based on one’s credit rating, it can be very difficult for people with a low credit score to qualify, let alone get a good interest rate. This means homeowners might not be able to pay Michigan roofers for repairs. Financial institutions also base a home equity loan on how much collateral is promised should homeowners miss payments.
Home improvement financing to pay for Michigan replacement windows should be thoroughly investigated before any signatures are affixed. When you get a home improvement loan from your contractor, ask for a written contract which explicitly states every stipulation on the loan. Make sure you fully understand the terms of the agreement. Consult a lawyer to ensure all legal bases are covered.
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