Given that there are hundreds of home renovation loans available, discovering which loan is right for your circumstances can feel daunting. While one good strategy is to ask your home remodeling company whether they partner with particular lending agencies, it’s helpful to have a basic understanding of your options from the outset.
With that in mind, we’ve given you a brief introduction to the most popular types of loans for your home renovation in Atlanta: home equity line of credit, home equity loan, personal loan, Title 1 loan, and Energy Efficient Mortgages.
Home Equity Line of Credit
A home equity line of credit, which is also sometimes referred to as a HELOC, is a wonderful loan option for major remodeling projects. A HELOC typically allows you to borrow up to 85% of your home equity minus what you owe on your mortgage. As long as you’re able to meet a minimum monthly payment, you’ll have the luxury of borrowing funds as you need them and repaying them as cash becomes available.
Because a home equity line of credit offers flexibility and a low interest rate, it’s one of the most popular loan options. You should be aware, however, that if you fail to meet monthly payments, your home can be foreclosed. For this reason, you should only procure a HELOC if your income is dependable, if you can afford the initial expenditure of taking out the loan, and if you’re financially prepared for your interest rate to increase over time.
Home Equity Loan
Unlike a HELOC, which allows you to borrow money as you need it, a home equity loan requires that you take out a fixed amount up front. On the plus side, it’s easier to figure the expense into your budget since monthly payments and interest rates don’t change. Remember that with a home equity loan, you’re still using your home itself as collateral, so be sure you can afford to pay your loan back before committing to this option for financing your home renovation in Atlanta.
While a personal loan has a higher interest rate and a shorter repayment period than a HELOC or a home equity loan, it can be a good option if you don’t have a lot of equity in your home and if your remodeling project is smaller. Personal loan interest rates are based on your credit (and sometimes other factors), and their interest rates are fixed.
Finally, FHA loans, or Federal Housing Association loans, come in two types: Title 1 loans and Energy Efficient Mortgages. You as a homeowner won’t receive these loans from the FHA. Rather, the FHA insures private lenders when loan defaults occur. Both loans are to be used for specific home improvement purposes and are better used to finance smaller-scale projects. You can learn more about Title 1 loan parameters here and Energy Efficient Mortgages here.
Calculating Your Loan
If you’d like to get a general idea of how much your home renovation loan with its interest rate may cost, check your credit rating and visit various bank and loan websites, most of which provide loan calculator tools.