If you are a homeowner, then you might think about getting a loan against your home in order to raise your equity, not realizing that the equity has increased over the years. This is especially true if your home is in a decent neighborhood. However, a homeowner may not be aware of this because lenders are not always honest.
Sometimes lenders will also direct contractors to motivate homeowners to build a new addition onto their home in order to raise their equity. The owner has placed their trust in this contractor so they do not check out other options before they are swayed into what seems to be a good deal.
Once the contractor starts the renovations he may also start to pressure the homeowner to sign papers, which the homeowner has not had time to carefully and thoroughly read. The homeowner later realizes that he has signed an agreement, which has increased his mortgage balance and interest to a point that his home is now in jeopardy. This is something that you need to be aware of as a homeowner. So, if you are approached with what looks like a good bargain, take time to cautiously read through the information before you agree to the contract. Of course this is especially true if the person is a “door to door salesman.” However, you should not let this make you fearful of home improvement equity loans in general.
There will be times when you are going to want extra money in order to do home improvements. One specific type of home improvement loan is called a home improvement equity loan. This will give homeowners the cash that they need in order to do internal and external repairs to their home.
The maximum amount that a homeowner can borrow is based upon their status with the lender. Established borrowers who have shown good faith may get 100% equity while a new customer may only get approximately 85% equity. These loans are usually repaid over a period of 15 years. Sometimes this length is longer or shorter though based upon the results of a person’s application.
Whenever a person gets a home equity loan they will have to choose between a fixed and adjustable rate. Most people choose a fixed rate because the rate will stay the same and not be subject to the fluctuation of the market. Those who do choose an adjustable rate will be paying a different rate every 3 months.
A lot of home improvement loans also insist that an independent contractor oversee the home improvements. In this way the bank can ensure that the loan is only used for home improvements. Another way of doing this, which is used by some lenders, is to set penalties on the loan.
Now that you know what to look for you are better educated and can choose the home equity loan that will work best for you and your family.