Maintaining a home can be an expensive undertaking and most homeowners do not have loose money sitting in a checking account to use for home repairs and upgrades. So, most American homeowners tend to borrow to complete this business.
But please be aware, there are things that your loan officer will not tell you about this home repair loan that you get. So, before you get a new mortgage to pay for major repairs, be sure to follow a specific guide to get some money:
Make sure you pay the least first of possible interest on this loan, so make sure you shop around, you do not need to refinance your mortgage. You should also try to get a tax deduction for what you pay for this mortgage and do not end up sacrificing your financial health and well-being. Not doing this is the first step to placing yourself in the poor house.
Then, make sure to take into account all the variables when applying for this loan:
Where can you get the best financing?
How will the monthly payments affect your budget?
How much equity do you have in your house?
What is the nature of your home improvement project
How long will it take you to repay the debt?
These are key questions that should point you in the right direction. You have to find the best loan option. But even then, you have to make sure that it does not cause the collapse of your budget. If this is the case, you will have serious problems regarding the monthly payment. Having less than twenty percent (20%) of the market value of equity in your home is a clear signal of expectation. This means that at one go, you can move from the happy owner to foreclosed properties if the financial institution you have borrowed goes belly up.
Regarding the nature of the project and the life of the loan, here are some questions you should ask yourself before taking out this loan.
1. How much does the house repair project cost? To calculate this, use the contractor's bid amount and subtly add 10% to 20% for potential cost overruns.
2. Will you be able to afford it? If you can not easily afford the monthly payments on the loan, you are in the process of courting the problem. even thinking about a home equity loan or a line of credit. As mentioned earlier, if you have less than 20% equity in your home, you will be forced to pay higher interest rates and you will have no backup in case of emergency.
3. Examine your other financial obligations? Your financial basis should be covered, that is, you should save enough money for retirement, to clear all existing credit card debts and at least ninety days of living expenses in an emergency fund.
4. Finally, will the project add value to your home? Some home repairs do not add enough value, especially the maintenance repairs. Many improvements to US homes add some monetary value, and normally you will not get back between 50% and 75% of what you spend on value added. So, the less value you¡¯re adding to your property, the more you should consider waiting until you can pay in cash, instead of taking a home repair loan.