If you need a new guest room or want to remodel your old kitchen to meet modern standards, you should look into getting a home improvement loan. These loans use your current home as equity.
There are two types of home improvement loans available, traditional home improvement loans and FHA Title I Home Improvement Loans. Both the loans require the borrower to be the owner of the house or for the borrower to be buying the home.
The traditional home improvement loan states that the borrower should have a substantial equity of 20 percent or more in the home. This, along with the improvements to the home is the collateral for the loan, and is for ten years or less. The interest paid here is tax deductible and is lower than the interest on personal loans.
The FHA Title I Home Improvement Loan is a U.S. government program aimed at helping borrowers improve their homes. This loan doesn’t cover certain improvements like swimming pools that are considered a luxury and not a necessity for the borrower. With this loan, the borrower need not have equity in the home for collateral. The payment period here can be for as long as 20 years and is available for those who have past credit problems, as long as they show some recent acceptable credit. As the requests here are usually under $7,500, no lien is taken on the home. Homeowners prefer this loan because the requirements are not that stringent and the interest is tax deductible.
So remember, this loan has a lower interest rate than other loans and is less risky. The only criterion for the loan is that the borrower must own the home, or at least be making payments on the home.
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