Remodeling Loans

Written by Beth Hrusch
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Home remodeling projects usually require some kind of financing. Most home owners find that even the smallest jobs, such as bathroom or bedroom redos, often snowball into major renovations as ideas and needs change. Thus, at one time or another almost everyone who owns a home will be faced with the challenge of funding a home project without paying high interest rates or being stuck with a long-term debt.

Options in Remodeling Loans

Traditional solutions to remodeling needs are still popular, such as equity lines, cash-out refinancing or credit cards. Equity lines let you use the value of your home to draw on a line of credit for a predetermined amount. After a certain amount of time, the line is converted to a loan and the remaining balance converted to a fixed monthly payment. Credit cards often come with high rates and are generally an acceptable solution for smaller cash requirements.

Another way to finance large-scale remodeling is with a construction loan, and there are two options if you choose to go this route. The construction perm loan is actually two loans, one for the actual remodeling and another to pay off the first one and become the permanent loan. The combination construction loan is one loan for the entire process. Terms and closing costs differ between these two loans.

The scale of the remodeling project is a major factor in determining which loan will provide the financing solution. However, other factors come into play, and a lender who specializes in remodeling loans will be a good resource for helping you making your decision. The key is to get adequate funds at a good rate, to ensure that the remodeling process is smooth and the end result satisfactory.

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