Home Remodel Financing - home equity, lines of credit, & loans: "Which Type of Financing is Best for You?
Again, this is going to vary a lot on a case-by-case basis. Loans are granted based on your credit history, income, present level of debt, and securable assets. Your lender will review all of these things and use what they discover to determine what kinds of financing you qualify for. Depending on your situation, here's a list of some of the most common financing options for homeowners to use (though keep in mind this list is by no means an exhaustive one):
Cash-out refinancing. If you've built up a substantial amount of equity in your home, and interest rates have dropped since you acquired your mortgage, this can be a financial windfall. You'll pay for your project and lower rates on the rest of your mortgage to boot.
Home equity lines of credit and home equity loans. These two financing options are very similar and very popular for home improvement. Both offer financing based on the equity you've built up in your home. Because of that they usually come with very reasonable interest rates, and the interest you pay is tax deductible.
Value Added Loans. These loans are granted based on the value that will be added to your home after the project you hope to undertake is finished. It allows owners of homes that have a lot of potential to borrow more than the home is presently worth.
Homeowner Loans. This type of financing is generally based on your income rather your equity. You won't be able to borrow as much, and your interest rate will be a little bit higher, but you won't have to jump through all the hoops that equity secured loans require."
