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Tuesday, July 29, 2008

How Home Improvement Loans Work for You

Many homeowners find after being in the same residence several years (and sometimes immediately after purchasing) that they need to start projects around the house whether to improve existing features or add more room as their family grows. The fixtures in the bathroom might be out of date, the plumbing might need to be changed over to plastic or copper, and that kitchen needs to be brought into the 21st century posthaste. Instead of tapping into savings to foot the bill for important and necessary improvements, many owners find that a home improvement loan can be a great option to help finance new projects around the house.

A home improvement loan is basically a loan against the equity you have in your house and can also be thought of as a second mortgage. If the loan is for your primary residence, the interest paid on the home improvement loan/second mortgage is tax deductible. Home improvement loan interest rates are usually reasonable and often lower than first mortgage rates. Also, qualifying for a home improvement loan is often easier because the guidelines are less stringent as these loans are considered less risky by lender. Banks do however like to see that your equity in your house is greater than 20% to view you as a good candidate for a home improvement loan.

Lenders usually view home improvement loans in a positive light as they add to the value of the borrowers home, and are often secured by a lien against the homeowners property, making them extremely low risk to the bank. Borrowing against the value of your home can be risky for you, the borrower, however. As you borrow against the value of your home, your equity is taken out, but if you happen to be in a market where house value is seeing a steady decline, this withdrawal of worth is balanced out by the increasing market value of your home. And let’s not forget, that a new bathroom, a freshly remodeled kitchen, or an extra bedroom do add value to your home when it becomes time to sell.

There exists a wealth of lenders that are available to lend money to qualifying homeowners needing financial stimulus to get home projects underway. Companies such as will work hard to answer any questions you may have, and help provide the best home improvement loan package available to suit your particular needs.
About the Author: Jeremi McMaster is Chief Executive Officer of, helping homeowners looking to refinance home mortgage. For information on a no closing cost refinance, go to

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