Second Mortgage for Home Improvement
Now that you have been in your home for a few years and you have
established some equity, you may be considering doing some home
improvement with a second mortgage.
Home improvement comes in many forms. Such as a new kitchen,
bathroom, roof, siding, etc.
You can acquire a home improvement loan or second mortgage
through one of three ways. Refinancing with cash out, a home
equity loan, or a home equity line of credit.
My suggestion to you would be, a home equity line of credit.
(HECL)
The HECL is a very convenient loan for a home owner because it
is not mandatory that you use the funds right away. And when you
do decide to use the money, you only use the amount you need.
Lets suppose you have a home equity line of credit for
$25,000.00. The lender will give this money to you as a line for
you to use, only when you choose to do so. The line also comes
with a check book so you can write checks at your convenience.
A refinance with cash out, or a standard home equity loan is
given to you in the form of a lump sum, and you begin paying the
interest and principal immediately.
On the HECL you only pay interest and principal when you use the
money, and only on the amount you use.
So lets suppose you hire a contractor to put a new bathroom in
your house for fifteen thousand dollars. Upon completion of the
project, you would than write a check from your HECL check book,
it's that simple.
At this time, your monthly payments would begin to kick in.
Most HECL's are amortized over twenty years, and the payment is
interest only for the first ten. So make sure you are aware of
the payment schedule before you close.
Home improvement is a great step to take with your home. It not
only adds value to your house, but it also improves the quality
of your life. And the interest is tax deductible.
As always, continue to educate yourself, and make sure you shop
around for the best deal.