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Home improvement loans provide a source of funds for owners to finance the improvements they want to make. These are usually, personal installment loans that are not collateralized by the home itself. Since there is more risk for the lender with this type of loan, the interest rate is higher than a normal mortgage loan.
In today's market, the rates on home improvement loans could vary between 6% and 36%. A borrower's credit score will determine the interest rate; the lower the score, the higher the rate and the higher the score, the lower the rate.
Smaller loan amounts are under $40,000 with larger loan amounts over $40,000 based on the extent of the improvements to be made. With all things being equal, a larger loan may have a lower interest rate.
Besides the interest rate being higher than a regular mortgage, the term is shorter. Similar to a car loan, the term can be between five and seven years. A $50,000 home improvement loan for a borrower, with good but not great credit, could have a 12% interest rate for seven years. That would make the monthly payment $882.64.
An alternative way to fund the improvements would be to do a cash out refinance. These types of loans are collateralized by the home. The current mortgage would be paid off with the new mortgage plus the amount for the improvements. Lenders will usually require that the owner maintain a minimum of 20% equity in the home.
Assuming a homeowner owed $230,000 on the existing mortgage and wanted $50,000 for improvements. The new loan amount would be $280,000 and the home would have to appraise for at least $350,000 for the homeowner to have a 20% equity remaining.
Another thing that occurs on a refinance is that the standard term for mortgages is 30 years which means the owner would be financing the improvements for 30 years instead of a shorter term. The advantage would be a smaller payment.
Let's say in this example, the owner originally borrowed $250,000 at 4.5% for 30 years with a payment of $1,266.71. After 54 payments, the unpaid balance is $230,335. If they did a cash out refinance at 4.5% for 30 years for the additional $50,000 and financed the estimated closing costs of $8,700, the new payment would be $1,464.50.
Using the home improvement loan, the combined payments would be $2,149.35 which would be $684.85 higher. While the cash out refinance produces a lower payment, it adds $8,700 to the amount owed and stretches it out over a longer period. Home improvement loans have lower closing costs than regular mortgage loans.
Another alternative loan is a HELOC or Home Equity Line of Credit which can be explored and compared to the two options mentioned above. If a homeowner is going to finance improvements, a comparison of different types of loans and payments can be helpful in the decision-making process.
A trusted mortgage professional is a valuable resource to assist you with current and accurate information. If you need a recommendation, please call me at (801) 230-6363.
I'm still in disbelief and humbled....I was awarded Realtor of the Year 2019, given the President's Award for my willingness to help and serve, Elite Producer, Sterling Honor, Education award for being one of the top 5% in obtaining the most continuing education, and an award for serving as the Community Relations and Legislative Director for the Tooele County Association of Realtors (TCAR). None of this would have been possible without these key people:
Mindy and Emily Barnes, they both thought enough of me to invite me to be a Chair for Emily as the director of Community Relations. I had no idea the amount of opportunity to serve in our community until they helped open my eyes. The majority of the awards listed above hinge on my involvement in TCAR's community service. I am so grateful for Mindy and the late Emily and their great example!!!!;
Ben, my sweet help meet, who did all the heavy lifting with client meetings, hours upon hours digging holes for signs (south rim is super duper rocky) and kid wrangling to allow for me to do meetings, paper work, client relations, marketing and community service;
Sam Clegg, is an incredible builder and I have had the blessed opportunity to put a marketing system in place to showcase his quality work and process and as a result help sell and bring to life some beautiful homes all around Tooele county. I absolutely love the building process and helping clients bring their home vision into reality;
My parents, DeLoy and Sharon, for their work ethic example!! Many many 12+ hour days were worked this past year to ensure the little details were taken care of for my clients;
Dad (Cal) and Mom (Edith), Shantel, Brindy, and Julie for loving and caring for Zane during meetings and community service;
and lastly I strive to do everything in my life with my mentor's example in mind, Jesus, with a constant prayer in my heart to serve all of my clients as best as possible.
As I stand at the top of this peak overlooking the valley of UPs and DOWNs of the last year that led to this beautiful and somewhat unintentional destination, I reflect and I am so grateful for the principles of success, found in The Church of Jesus Christ of Latter Day Saints, that helped guide my decision making process and helped me maintain focus to endure the challenges and long days. As most agents can testify, the ups and downs of real estate can be emotional and stressful and certainly not for the faint of heart. I know without doubt that paying tithing, being honest with my fellow men and trusting God in all things has led to a success beyond my own capacity.
I truly treasure all of the many helping hands and relationships that I've been blessed to enjoy throughout the year with my clients, Sam, fellow Realtors and affiliates, architect and agent Andy, my Community Relations committees, my Chair (Caleb Metzger) and co-chair (Ben Hardman), Legislative Chair (Cathy Maxfield) and co-chair (Faye Hall), TCAR President, Hiedi Purvis, all TCAR Board of Directors, Andrea Sweat, Krizia, Holly, my brokers: Steve Perry, and Cathy, my preferred lenders: Ashlie Stringer Roe, Debbie Gittins Castagno, and Danielle, Carrie Cook, Stacie, and Teresa and Wise Choice Real Estate-Tooele!!! Thank you all for directly and indirectly making this a great field to work in.
We are excited to announce an open house for an incredible home in Stansbury Park. 14 Dec 2019 11 AM to 1 PM. This home features 6 bedrooms and 3.5 bathrooms, a huge great room for entertaining, a formal entry office or living room, a craft room or den for the kids to play in, a theater room with a wet bar, solar (paid for and comes with the home), great outdoor living with a fire pit, raised garden beds, a pergala and lots of concrete....even enough for your RV! Come check out this beautiful home that is a minute walk to a park and just minutes away from Stansbury Lake for canoeing, paddle boarding and kayaking.
Open house this Saturday!! November 2nd, 2019 starting at 11 AM to 1 PM. Address: 317 Baker LN Grantsville, UT 84029.
Looking for a shop or a large garage for all your outdoor toys and recreational vehicles? This would be a perfect home for you!!! No money wasted in putting in a yard, this one has full landscaping with mature trees. The home is move-in ready and awaiting its new owners. Come check it out for yourself this Saturday 11 - 1 PM.
PS!!! The hot tub is included!!!
Ben and Lacy Hardman, Wise Choice Real Estate
We would love to do an open house for you! We will create a video that show cases your home and market the video for maximum participation at our open house. We will take beautiful exterior and interior photos that will optimize the natural light and beauty in your home. We will take 200 door hangers to homes within a mile of yours to help spread the word of your home being listed on the market. We will conduct some neighborhood interviews and showcase your neck of the woods!! We will have a great day showing your home and every person viewing your home will wear booties and have a copy of the details that make your home amazing! We will have some balloons for the kids, some "to go" treats for our viewers and hopefully a couple of offers for you!!! We would love to show case your home!!!
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