Improve your home without having to move

Perhaps you delayed the decision to buy a new house during the recent housing boom. By the time you were ready, economic conditions had changed and your financing options were limited. Sometimes the house of your dreams can be the one you are living in. While a new house might be out of reach, using the equity in your home to improve the one you are living in might be a good alternative. There are three types of loans that could be used for home improvements: home improvement loans, home equity loans and home equity lines of credit.

Home Improvement Loan
Home improvement loans are granted based on several factors. Your credit worthiness and project will be evaluated to determine how much you can borrow and whether or not it needs to be secured. Some lenders may lend partially based on the equity your home will have after the improvements. It is best to work with reputable contractors and builders merchants, so that the size of the project does not become unmanageable. Cost overruns and unanticipated expenses are typical with inexperienced contractors.

Home Equity Loan
Some home improvement loans take the form of secured home equity loans. A home equity loan offers you a fixed loan amount for a fixed term or number of months over a period of several years. Loans like this are perfect for home improvement projects for which the cost can be closely estimated. You will be motivated to keep your project on track and on budget because the need for more money means applying for a new loan.

Home Equity Line of Credit
This type of loan offers the most freedom. Based on the equity in your home, a lender will determine how much money it will make available to you whenever you want to use it. While this type of loan is best for paying off things like medical bills or educational expenses, they can also be used to make improvements on your home. It is easy to be undisciplined about your home improvement projects when you are using a home equity line of credit, because you can draw on it whenever you like.