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Home Equity Line Of Credit – Great For Remodeling Projects
By: Charles Essmeier
Many homeowners are lucky enough to find a house that represents exactly what
they want in a home. They buy it, make the payments on it, and live more or less
happily ever after. Others are not so fortunate. Some buyers who live in a
pricey market may have to settle for less house than they need, hoping to find a
solution to their lack of space later. A third group of buyers may find that
their housing needs change over time, as their family size increases. What can
be done in these situations?
A common solution to these problems is to add on to the house, often
accomplished by converting a garage to a room, adding a room over the garage, or
simply adding a room somewhere else on the property. For these projects, a home
equity loan is a great source of financing. The home itself is used as
collateral for the loan, and the addition actually increases the value of the
house. As most of these projects involve a fixed cost, the payments can be
structured at a fixed interest rate over a specific period of time. But what
about the do-it-yourself project? What if the problem with the home isn’t a lack
of space, but a lack of taste on the part of previous owners? Is there a better
financing choice in these situations?
If your problem is gold appliances, lime green carpet, and smiley face
wallpaper, you may be looking at a remodeling project of indeterminate duration.
For such a project, a better financing choice would be a home equity line of
credit, or HELOC. A line of credit offers greater flexibility, both in interest
rates and repayment terms, than a traditional line of credit. The loan amount is
based on the amount of equity in the home, but the funds aren’t dispersed all at
once. Instead, the borrower is given a checkbook, a special credit card, or both
and can use them to draw upon funds at his or her leisure. Payments only apply
when money is actually borrowed, and the repayment plans can be arranged with
both fixed and adjustable interest rates, depending on the lender. This is ideal
financing for someone who has purchased a fixer-upper home that needs a variety
of changes, repairs, or modifications. The credit card can easily be used to
purchase paint, drapes, flooring, appliances or whatever the homeowner requires
to make the home fit their needs.
If you just need to hire a contractor to add a gameroom to your home, a
traditional home equity loan would work well. For ongoing projects with
indefinite timeframes and budgets, a home equity line of credit may be the best
choice.
© Copyright 2005 by Retro Marketing.
About the Author:
Charles Essmeier is the owner of Retro Marketing, a firm devoted to
informational Websites, including
www.End-Your-Debt.com, a Website
devoted to debt consolidation information and
www.HomeEquityHelp.net, a
site devoted to information on home equity loans. |
