| The fact that these loans are based on equity and | | | | are rather expensive and an important amount of |
| that you are planning to improve the property that is | | | | funds are needed to undertake home improvement |
| guaranteeing them has several implications that need | | | | projects. |
| to be taken into account. Both the lender and the | | | | An Alternative: Home Equity Lines of Credit for Home |
| borrower will benefit from the fact that the loan will be | | | | Improvements |
| used to improve the asset that is guaranteeing the | | | | These lines of credit are revolving sources of funds |
| loan. | | | | that are also guaranteed with your home equity. |
| Home Equity Loans (Second Mortgages) | | | | Instead of a fixed loan amount, what you are offered |
| Home equity loans or second mortgages are based | | | | when requesting a home equity line of credit, is a |
| on the remaining equity on your home. Basically, equity | | | | flexible source of funds with certain credit limit. Up to |
| is the difference between the home value of your | | | | this limit you can request as much money as you need |
| property and the outstanding debt guaranteed by that | | | | and repay it the way you want. Generally, the minimum |
| property. Home equity loans use this equity as | | | | payment is the interests charged for the money you |
| collateral to guarantee the loan just like home loans | | | | withdraw. |
| use the property as collateral. | | | | Once you repay the principal, you can withdraw it |
| This implies that the risk involved for the lender is | | | | again as many times as you want as long as you don't |
| reduced due to the guarantee and thus, the interest | | | | exceed the credit limit. This tool provides a lot of |
| rate charged is low. These loans along with home | | | | flexibility that comes in very handy when making home |
| loans are probably the lowest rate loans of the private | | | | improvements that have costs that you can't always |
| financial market. This in turn, implies also low monthly | | | | predict and thus having a fixed amount can seriously |
| payments which are perfect for financing home | | | | limit your project. |
| improvements so you don't have to pay high lump | | | | The main difference as regards the terms of home |
| sums every month. | | | | equity loans and lines of credit is that home equity lines |
| Also, since these loans are guaranteed, the lender is | | | | of credit always carry a variable interest rate that is |
| willing to offer higher loan amounts. However, the loan | | | | altered every three months according to market |
| amount will be limited by the equity left on your home. | | | | conditions, while home equity loans can carry either a |
| Higher loan amounts are also very useful for home | | | | variable rate or a fixed interest rate that will remain the |
| improvements because generally, home improvements | | | | same all through the life of the loan. |