Unbeatable rates on Mortgages, Refinancing, Home Equity, HELOCs and Personal Loans

Home equity loans

A home equity loan is like a second mortgage. The loan is secured using your house as collateral. With this type of loan, you receive a lump sum at a fixed interest rate to cover your renovation costs.

The entire amount of the loan will be in your bank account once the loan is approved. After that, you'll make repayments over five to 20 years.

Due to the fixed rate, your monthly payments remain more or less the same, even if interest rates rise during the life of the loan (loan term).

A home equity loan works well to finance home improvements if you have at least 20% equity in your house. Since you can use your home as collateral, the interest rates are typically going to be lower than for personal loans. Plus, you can borrow between 80% and 85% of your home's value, minus what's left on your mortgage.

This kind of loan is best suited for large-scale home renovations, such as remodeling a kitchen, a bathroom renovation, or another major home project.

Home equity lines of credit (HELOCs)

A home equity line of credit is almost like using a credit card. Instead of borrowing a huge amount of money at once, you can tap into your home's equity when you need it.

The average draw period - the amount of time you can withdraw funds - for a HELOC is up to 10 years, with a repayment period going up to 20 years. After the loan has been repaid, the homeowner can renew the line of credit if needed.

A HELOC is your best loan option if you're either unsure about your total home improvement project cost or if you plan to pay for it in stages. The loan could be for anything, from adding a new kitchen island to building a sunroom or other addition.

You can get a line of credit worth up to 85% of your home's value, minus what's owed on any mortgages. Keep in mind that HELOCs come with variable interest rates, meaning they fluctuate to match current market rates.

Cash-out refinance

This type of loan is a refinancing option that allows you to convert the equity in your home into cash. It replaces your existing mortgage, and you may be able to get better terms. The new home loan will be for a larger amount than the existing one, and then you get the difference between them paid out to you.

That is to say, the borrower receives a new, larger loan that replaces the current mortgage and pays off the old one while also receiving the difference in cash.

It is a riskier loan that lowers your home's equity and is frequently utilized to cover unforeseen expenses. The downside is that you may go underwater on your mortgage if the value of your home decreases.

Personal loans

You can borrow a fixed amount of money and pay it back in monthly installments with interest for a loan term, usually shorter than other options. The downside is that it has a high interest rate. As it is an unsecured loan type, it requires a good credit score (>=630). Many loan lenders allow you to pre-qualify for the loan without damaging your credit score so that you may view your possible interest rates and loan terms.

0% APR (annual percentage rate) credit cards

0% APR credit cards, which waive interest charges for an introductory period of about 12 to 18 months, are another option to finance your home improvements, especially smaller home upgrades. However, you should only use this option if you're confident that you can pay off the card's balance in full before the introductory offer expires.

Generally, a credit card requires a credit score higher than 670. The downside is that you may get penalized hard if you fault on your monthly payments. Credit cards are recommended only for smaller, less expensive upgrades.

Government loans

If you qualify and fit the specific requirements of a government-backed loan such as the FHA loan by the Federal Housing Administration or a VA loan by the U.S. Department of Veterans Affairs, you could save on the interest and insurance.

And, there are other benefits too. For example, the HUD property improvement loan by the U.S. Department of Housing and Urban Development lets you borrow up to $25,000 without having any home equity. It's a good home repair loan option if you need to make upgrades to a recently bought house. The only condition is that the money must go toward renovations that improve the livability of the home and its value.

The advantage of government loans is that they generally have better terms and conditions than most private loans.

But, the drawback is that there are stringent rules for loan eligibility that not everyone may qualify for.