Thursday, March 8, 2007
Wednesday, March 7, 2007
Home Construction Financing
Home Construction FinancingHome construction lending is a little different than regular mortgage financing.
First, you will be given a construction line that will be used to pay subcontractors and suppliers who perform work and provide supplies.
And then at the end of the construction project, you will use a residential mortgage to pay off the construction line.
Construction Line
You will ask the lender to open a home construction line that will be used to pay subcontractors and suppliers during the construction phase of the project. Generally, these players require payment within 30 to 60 days following work completion.
Feeling inspired? Get matched to prescreened pros to:Get Mortgage Quotes for a New Home Purchase
Once each month, or after each stage of the home construction, your builder will submit a request for funds to pay for subcontracting work and supplies that were used during the construction phase. The lender will release funds after they have verified that the amount requested will be used for the construction phase that has been completed.
Let's run through a simple illustration: Say that your construction project is estimated to cost $100,000. The project will be completed in five phases.
At the end of the first phase, you will request a release of funds ($20,000) from the bank to pay subcontractors and suppliers who completed work during this phase.
Typically, the lender will send out an inspector to verify that the work has been completed. If passed, funds will be released to line the next day.
(This example was a simple illustration on how the construction line may work. The actual procedure may differ by lender.)
Lenders normally have a fixed draw schedule tied to each major phase of the construction. If you request more draws than allowed per project, you may be charged a nominal fee per draw.
Don't underestimate your need for up-front cash. You will normally spend more money during The first construction phase than what you can draw up front.
The construction line generally carries a higher interest rate than residential home mortgages.
Residential Mortgage
You will need to apply for a residential mortgage to pay off the construction line when you finish the construction project. In most cases, this will be required prior to obtaining the construction line. The residential mortgage is like any other single-family home mortgage loan. These include conventional and non-conventional loans, fixed, adjustable rates, etc.
Construction/Perm Loans
Some lenders offer both the construction line and residential mortgage as one loan.
The Construction/Perm loan is a combined loan made directly by the lender to the borrower. It functions as a construction line for financing the construction of the home, and then it serves as a permanent mortgage by paying off the construction line after you complete the construction project.
The Construction/Perm loan has some advantages, namely:
The borrower can save money by paying for only one set of closing costs, attorney's fees, appraisal and taxes.
Since the construction line is contingent upon approval of the residential mortgage, obtaining a construction/perm loan allows the borrower to submit and provide documentation for one loan application and work through one lending institution. The borrower will work with one loan and one lender.
Because the loan is made directly to the homeowner, the borrower can take full tax advantage of the interest rate charges.
The Construction/Perm loan may also carry some disadvantages:
Obtaining the best rate and terms. Some Construction/Perm loans carry higher than prevailing market rates.
Even though you may be working with one lender, usually the loan is managed by two separate departments. You may need to provide duplicate documentation.
It is best to shop around to determine your best options.
What Will You Need for Home Construction Financing?
Start-up Construction BudgetA start-up construction budget
is a cash budget prior to obtaining your construction financing. Builders suggest anywhere from $5,000 to $10,000, depending on the size and scope of the construction.This up-front expense is considered part of the overall project cost and is often part of the down payment or "reimbursed" as part of the construction loan.
Down Payment
Generally a down payment of 20 percent or more is needed. The down payment may be cash, equitable securities, or the equity in an existing home or land purchase.If you are using your home equity, make sure you obtain a true market value of your home and anticipated time to sell your home.
Planned Budget
Know your limits. It can become tempting to add additional items to the home that will place the entire project out of budget. Some buyers have a budget cushion for upgrades and other changes
Documentation
Your submission of an application will require documentation of income and employment similar to a home resale mortgage application.
This will include verification of employment (e.g., W-2s, pay stubs), or if self-employed, documentation of income, savings and investment account statements. In addition, the lender will require construction specifications and cost breakdown for building your home. You will also need to provide the purchase contract or title to the construction site.
Courtesy of SayLending.com
First, you will be given a construction line that will be used to pay subcontractors and suppliers who perform work and provide supplies.
And then at the end of the construction project, you will use a residential mortgage to pay off the construction line.
Construction Line
You will ask the lender to open a home construction line that will be used to pay subcontractors and suppliers during the construction phase of the project. Generally, these players require payment within 30 to 60 days following work completion.
Feeling inspired? Get matched to prescreened pros to:Get Mortgage Quotes for a New Home Purchase
Once each month, or after each stage of the home construction, your builder will submit a request for funds to pay for subcontracting work and supplies that were used during the construction phase. The lender will release funds after they have verified that the amount requested will be used for the construction phase that has been completed.
Let's run through a simple illustration: Say that your construction project is estimated to cost $100,000. The project will be completed in five phases.
At the end of the first phase, you will request a release of funds ($20,000) from the bank to pay subcontractors and suppliers who completed work during this phase.
Typically, the lender will send out an inspector to verify that the work has been completed. If passed, funds will be released to line the next day.
(This example was a simple illustration on how the construction line may work. The actual procedure may differ by lender.)
Lenders normally have a fixed draw schedule tied to each major phase of the construction. If you request more draws than allowed per project, you may be charged a nominal fee per draw.
Don't underestimate your need for up-front cash. You will normally spend more money during The first construction phase than what you can draw up front.
The construction line generally carries a higher interest rate than residential home mortgages.
Residential Mortgage
You will need to apply for a residential mortgage to pay off the construction line when you finish the construction project. In most cases, this will be required prior to obtaining the construction line. The residential mortgage is like any other single-family home mortgage loan. These include conventional and non-conventional loans, fixed, adjustable rates, etc.
Construction/Perm Loans
Some lenders offer both the construction line and residential mortgage as one loan.
The Construction/Perm loan is a combined loan made directly by the lender to the borrower. It functions as a construction line for financing the construction of the home, and then it serves as a permanent mortgage by paying off the construction line after you complete the construction project.
The Construction/Perm loan has some advantages, namely:
The borrower can save money by paying for only one set of closing costs, attorney's fees, appraisal and taxes.
Since the construction line is contingent upon approval of the residential mortgage, obtaining a construction/perm loan allows the borrower to submit and provide documentation for one loan application and work through one lending institution. The borrower will work with one loan and one lender.
Because the loan is made directly to the homeowner, the borrower can take full tax advantage of the interest rate charges.
The Construction/Perm loan may also carry some disadvantages:
Obtaining the best rate and terms. Some Construction/Perm loans carry higher than prevailing market rates.
Even though you may be working with one lender, usually the loan is managed by two separate departments. You may need to provide duplicate documentation.
It is best to shop around to determine your best options.
What Will You Need for Home Construction Financing?
Start-up Construction BudgetA start-up construction budget
is a cash budget prior to obtaining your construction financing. Builders suggest anywhere from $5,000 to $10,000, depending on the size and scope of the construction.This up-front expense is considered part of the overall project cost and is often part of the down payment or "reimbursed" as part of the construction loan.
Down Payment
Generally a down payment of 20 percent or more is needed. The down payment may be cash, equitable securities, or the equity in an existing home or land purchase.If you are using your home equity, make sure you obtain a true market value of your home and anticipated time to sell your home.
Planned Budget
Know your limits. It can become tempting to add additional items to the home that will place the entire project out of budget. Some buyers have a budget cushion for upgrades and other changes
Documentation
Your submission of an application will require documentation of income and employment similar to a home resale mortgage application.
This will include verification of employment (e.g., W-2s, pay stubs), or if self-employed, documentation of income, savings and investment account statements. In addition, the lender will require construction specifications and cost breakdown for building your home. You will also need to provide the purchase contract or title to the construction site.
Courtesy of SayLending.com
Monday, March 5, 2007
Why Financial Background Checks Are Important
Good credit is one sign of a company's financial health and stability. You can talk with subcontractors and suppliers regularly used by the contractor. Ask if the contractor paid them on time. Ask if they've had any problems dealing with the contractor or if they feel the contractor's credit is good. If a subcontractor or supplier reports any problems with the contractor, you may want to think twice before hiring the contractor.
If a contractor fails to pay the subcontractors and suppliers, they could go to court to force you to pay for any unpaid bills from your project, possibly even forcing you to sell your home. One way to protect yourself from this action is to ask the contractor and every subcontractor and supplier for a lien release or a lien waiver. For more information on liens, ask a local consumer agency for an explanation of lien laws in your area.
Insurance
If a contractor does not have the appropriate insurance, you may be held liable for any injuries or damages that occur during the project. General liability insurance, worker's compensation and property damage coverage are particularly important. If workers are injured on the job, the contractor's insurance will cover their injuries, and you won't be held liable. Insuring your project can provide safeguards not only to prevent liability but also to protect you against errors and omissions and breaches of warranties. For example, without insurance, if the service professional orders supplies and fails to pay for them, you will have to pay the bill to the suppliers even if you've already paid the service professional for the supplies.
Feeling inspired? Get matched to prescreened pros to:Remodel a Kitchen
Homeowner's insurance may provide further protection. Read your homeowner's policy carefully or ask your insurance agent. If faulty workmanship leads to problems, your homeowner's policy may not cover damages.
After signing a contract, contractors should notify their insurance agents and have an insurance certificate mailed to you. The certificate will show active insurance for that contractor.
Bonding
A bond provides additional protection to a homeowner. To obtain a license, some states require that contractors post a bond. A bond is basically a piece of paper a contractor buys from a bond company that is worth a specific amount of money. If a contractor fails to complete a job, a homeowner can turn to the bond company and attempt to collect the bond fee due to nonperformance.
In addition, a homeowner who sues a licensed contractor for faulty work can sue the bond company. This is particularly helpful in cases where the contractor is insolvent or has gone out of business.
Although a bond may only provide minor financial protection (many states have minimum amounts for bonds, such as $5,000), it is still another avenue homeowners have for financial protection if things go wrong.
If a contractor is not bonded and abandons a job, the homeowner may not be able to recover any expenses.
Credits to: http://www.servicemagic.com/article.show.Why-Financial-Background-Checks-Are-Important.8553.html?oids=29c1c79
If a contractor fails to pay the subcontractors and suppliers, they could go to court to force you to pay for any unpaid bills from your project, possibly even forcing you to sell your home. One way to protect yourself from this action is to ask the contractor and every subcontractor and supplier for a lien release or a lien waiver. For more information on liens, ask a local consumer agency for an explanation of lien laws in your area.
Insurance
If a contractor does not have the appropriate insurance, you may be held liable for any injuries or damages that occur during the project. General liability insurance, worker's compensation and property damage coverage are particularly important. If workers are injured on the job, the contractor's insurance will cover their injuries, and you won't be held liable. Insuring your project can provide safeguards not only to prevent liability but also to protect you against errors and omissions and breaches of warranties. For example, without insurance, if the service professional orders supplies and fails to pay for them, you will have to pay the bill to the suppliers even if you've already paid the service professional for the supplies.
Feeling inspired? Get matched to prescreened pros to:Remodel a Kitchen
Homeowner's insurance may provide further protection. Read your homeowner's policy carefully or ask your insurance agent. If faulty workmanship leads to problems, your homeowner's policy may not cover damages.
After signing a contract, contractors should notify their insurance agents and have an insurance certificate mailed to you. The certificate will show active insurance for that contractor.
Bonding
A bond provides additional protection to a homeowner. To obtain a license, some states require that contractors post a bond. A bond is basically a piece of paper a contractor buys from a bond company that is worth a specific amount of money. If a contractor fails to complete a job, a homeowner can turn to the bond company and attempt to collect the bond fee due to nonperformance.
In addition, a homeowner who sues a licensed contractor for faulty work can sue the bond company. This is particularly helpful in cases where the contractor is insolvent or has gone out of business.
Although a bond may only provide minor financial protection (many states have minimum amounts for bonds, such as $5,000), it is still another avenue homeowners have for financial protection if things go wrong.
If a contractor is not bonded and abandons a job, the homeowner may not be able to recover any expenses.
Credits to: http://www.servicemagic.com/article.show.Why-Financial-Background-Checks-Are-Important.8553.html?oids=29c1c79
Using Home Equity for Remodels
You have already paid all of this money in principle, and it stands to reason that you should leverage that in whatever way you can. There are two basic ways to get the most of your home equity when you are considering a remodeling project. The two smartest and most common methods of financing a home remodeling project are using your Home Equity Line of Credit (HELOC) and/or a Home Equity Loan. These two methods are often difficult to distinguish, but this article can shed a little light on which is which, while getting you on your way to a fantastic home remodel.
HELOC
So how does it work? A Home Equity Line of Credit is exactly like a credit card that you set up with your lender. You have a credit limit that is proportional to the amount of equity you have in your home. Once you have your HELOC account set up, simply advance yourself funds by writing a check. You will pay interest only on the amount you borrow, just like with a credit card. You can use your home equity line whenever you need just like the plastic you have now.
Home Equity Loans
Home Equity Loans are yet another way to finance larger projects from the equity you have in your home. These are often called second mortgages (as are HELOCs), and you are allowed to borrow a certain amount no larger than the current equity you have in your home, either from principle payments or property value increases. These are standard loans with fixed rates, and they usually have to be paid back in 15 years or less. With these loans, you borrow a specific amount and have a set monthly payment.
Advantages to Financing Home Remodeling Projects with Home Equity
The average cost of a complete kitchen remodel in the United States in 2004 was $30,000. This is a big enough number that most homeowners need some type of financing, if only partially, to help cover the cost. While both Home Equity Lines of Credit and Home Equity Loans are good candidates for any remodeling project, depending on the project, one might be better than the other.
Kitchen & Bathroom Remodels
These are the two most popular home remodels. They add value to a house, and in many cases have a massive return on their investment. The problem is that estimates from contractors are exactly that, and nearly every project ends up costing a different amount—whether higher or lower—than was originally planned. You will change your mind about 100 times on which materials you want to use, the contractor will run into unforeseen problems, the market price of your materials will fluctuate, among many other things that will swing the price.
The great thing about HELOC is that it is a credit card and you are only paying interest on what you borrow. Let's say you have a $25,000 line of credit that you have earmarked for a kitchen remodel. Your contractor bids your remodel at $15,000. Now you have $10,000 in wiggle room in case you decide on cherry cabinets rather than pine, or stainless steel appliances rather than keeping your old ones. If you decide to hold back a little for the time being, you don't have all this borrowed money lying around.
In the cases of bigger remodels that have several components, HELOC might be the way to go because it allows you the freedom to get a little more money or use a little less. Granted, your interest rate will not be locked in, but this is the rub with HELOC.
Swimming Pools & New Windows
Because of the nature of swimming pool additions and replacing your windows new, the pricing is fairly static. There might be a little flux, but typically these types of remodels don't bounce too much in price. As a result, a home equity loan might be the best route. You take out exactly what you need, and pay for the project in full from the loan check. Sometimes using a home equity loan for remodels that have variant pricing can leave a homeowner without enough money to pay for the project, or they are left holding too much cash because they over-budgeted. Try as we might, most of us aren't strong enough to give that money back as we should.
Dollars & Sense
There are dozens of home remodeling projects that are expensive enough as to need financing: home additions, cabinets, flooring, siding, windows, a new roof, just to name a few. These are just two very smart ways to finance your home remodeling projects. If you have a rich aunt, win the lottery, or discover sunken treasure off the coast of the Bahamas on vacation and want to use that money for your kitchen remodel, that is fine, too. But for most of us, the financing options listed above are the best ways to go.
Credits to: http://www.servicemagic.com/article.show.Using-Home-Equity-for-Remodels.13471.html?oids=29c0&link_id=4691
HELOC
So how does it work? A Home Equity Line of Credit is exactly like a credit card that you set up with your lender. You have a credit limit that is proportional to the amount of equity you have in your home. Once you have your HELOC account set up, simply advance yourself funds by writing a check. You will pay interest only on the amount you borrow, just like with a credit card. You can use your home equity line whenever you need just like the plastic you have now.
Home Equity Loans
Home Equity Loans are yet another way to finance larger projects from the equity you have in your home. These are often called second mortgages (as are HELOCs), and you are allowed to borrow a certain amount no larger than the current equity you have in your home, either from principle payments or property value increases. These are standard loans with fixed rates, and they usually have to be paid back in 15 years or less. With these loans, you borrow a specific amount and have a set monthly payment.
Advantages to Financing Home Remodeling Projects with Home Equity
The average cost of a complete kitchen remodel in the United States in 2004 was $30,000. This is a big enough number that most homeowners need some type of financing, if only partially, to help cover the cost. While both Home Equity Lines of Credit and Home Equity Loans are good candidates for any remodeling project, depending on the project, one might be better than the other.
Kitchen & Bathroom Remodels
These are the two most popular home remodels. They add value to a house, and in many cases have a massive return on their investment. The problem is that estimates from contractors are exactly that, and nearly every project ends up costing a different amount—whether higher or lower—than was originally planned. You will change your mind about 100 times on which materials you want to use, the contractor will run into unforeseen problems, the market price of your materials will fluctuate, among many other things that will swing the price.
The great thing about HELOC is that it is a credit card and you are only paying interest on what you borrow. Let's say you have a $25,000 line of credit that you have earmarked for a kitchen remodel. Your contractor bids your remodel at $15,000. Now you have $10,000 in wiggle room in case you decide on cherry cabinets rather than pine, or stainless steel appliances rather than keeping your old ones. If you decide to hold back a little for the time being, you don't have all this borrowed money lying around.
In the cases of bigger remodels that have several components, HELOC might be the way to go because it allows you the freedom to get a little more money or use a little less. Granted, your interest rate will not be locked in, but this is the rub with HELOC.
Swimming Pools & New Windows
Because of the nature of swimming pool additions and replacing your windows new, the pricing is fairly static. There might be a little flux, but typically these types of remodels don't bounce too much in price. As a result, a home equity loan might be the best route. You take out exactly what you need, and pay for the project in full from the loan check. Sometimes using a home equity loan for remodels that have variant pricing can leave a homeowner without enough money to pay for the project, or they are left holding too much cash because they over-budgeted. Try as we might, most of us aren't strong enough to give that money back as we should.
Dollars & Sense
There are dozens of home remodeling projects that are expensive enough as to need financing: home additions, cabinets, flooring, siding, windows, a new roof, just to name a few. These are just two very smart ways to finance your home remodeling projects. If you have a rich aunt, win the lottery, or discover sunken treasure off the coast of the Bahamas on vacation and want to use that money for your kitchen remodel, that is fine, too. But for most of us, the financing options listed above are the best ways to go.
Credits to: http://www.servicemagic.com/article.show.Using-Home-Equity-for-Remodels.13471.html?oids=29c0&link_id=4691
Sunday, March 4, 2007
Easy Financing Essentials for Remodeling
More and more homeowners are deciding that the best way to improve their lifestyles and their personal balance sheets is to invest in their single biggest asset: their home. Home remodeling and improvements are not only a winning investment because they increase property values, but also because they can help us enjoy life in our own homes.
Below are the basics for the most common ways to finance home improvements and remodeling projects.
The Basics
Secured / Unsecured loans:
In general, loans can be described as secured or unsecured. An unsecured loan is a loan in which the borrower agrees to repay the money according to a pre-set schedule. A secured loan is the same thing, except that if the borrower doesn't keep up with the payments, he/she gives the lender the right to seize a particular asset and sell it to raise the money necessary to pay off the loan.
Feeling inspired? Get matched to prescreened pros to:Remodel a Bathroom
With home improvements and remodeling, the asset pledged is usually the house itself. The piece of paper that documents this pledge is usually called a mortgage or a deed of trust. A single property can be pledged in more than one loan, but when this happens, the loans are explicitly ranked in priority. That's why you hear so much about first mortgages and second mortgages.
There are basically three good reasons to consider secured loans:
To borrow more money
To get a lower interest rate
To reduce taxes
Qualifying for a loan:
Before actually applying for a loan, talk to lenders about all your options. Keep in mind, the lender will tend to focus on the options they carry. This is why many people like to start with an established mortgage broker as they usually carry many more types of loans. Besides helping you understand your options and the various trade-offs involved, the lender can pre-qualify you for one or more loans. Because they are familiar with the lending rules, they can tell you up front what the likely response to your application will be.
Lenders are usually concerned about four issues:
Income
Debts
Credit history
Property value
Points and interest rates:
Many loans involve something called points. Points are nothing more than a fee for the loan that is expressed as a percentage of the loan amount. One point equals one percent. So if you take out a loan for $100,000 and the lender charges two points, the fee costs you 2% of $100,000 or $2000. Points exist so the lender can pay for the loan set-up expenses, as well as, make a profit.
Variable vs. fixed interest rates:
For some loans, the interest rate stays the same throughout the loan. This is known as a fixed rate loan. On other loans the interest rate can rise or fall as market conditions change. These "variable" rates are usually tied to some common market wide interest rate like the prime rate. The prime rate is a well-known rate that represents the rate that big banks charge their best big business customers. A variable rate loan might be described as being set at "prime plus two" which means the rate will always be two percentage points higher than whatever the current prime rate is.
The Institutions
Selecting a lender:
There are three kinds of institutions that can help:
Mortgage brokers
Banks
Specialized lenders
Mortgage brokers typically represent a number of money sources including regional and national banks, specialized lenders, insurance companies and even wealthy individuals. This diversity is their greatest strength. It means that they are likely to offer a wide number of options.
Working with bankers is another very popular way to get loans. If you have a good personal relationship with the lender and the lender offers a wide variety of loans, this can be a great route to go. If you don't already have a strong relationship with your banker, yet you are confident about getting the loan, this can be a good opportunity to start up that relationship.
Specialized lenders come in all shapes and sizes. These are generally lenders who specialize in one or two specific types of loans. There strength is that they are very knowledgeable about the options they work with and may have streamlined the processing to the point where they can offer very competitive rates. However, don't count on specialized lenders to introduce you to a wide range of options.
Specific financing options:
Below are the basics for the most common ways to finance home improvements and remodeling projects.
The Basics
Secured / Unsecured loans:
In general, loans can be described as secured or unsecured. An unsecured loan is a loan in which the borrower agrees to repay the money according to a pre-set schedule. A secured loan is the same thing, except that if the borrower doesn't keep up with the payments, he/she gives the lender the right to seize a particular asset and sell it to raise the money necessary to pay off the loan.
Feeling inspired? Get matched to prescreened pros to:Remodel a Bathroom
With home improvements and remodeling, the asset pledged is usually the house itself. The piece of paper that documents this pledge is usually called a mortgage or a deed of trust. A single property can be pledged in more than one loan, but when this happens, the loans are explicitly ranked in priority. That's why you hear so much about first mortgages and second mortgages.
There are basically three good reasons to consider secured loans:
To borrow more money
To get a lower interest rate
To reduce taxes
Qualifying for a loan:
Before actually applying for a loan, talk to lenders about all your options. Keep in mind, the lender will tend to focus on the options they carry. This is why many people like to start with an established mortgage broker as they usually carry many more types of loans. Besides helping you understand your options and the various trade-offs involved, the lender can pre-qualify you for one or more loans. Because they are familiar with the lending rules, they can tell you up front what the likely response to your application will be.
Lenders are usually concerned about four issues:
Income
Debts
Credit history
Property value
Points and interest rates:
Many loans involve something called points. Points are nothing more than a fee for the loan that is expressed as a percentage of the loan amount. One point equals one percent. So if you take out a loan for $100,000 and the lender charges two points, the fee costs you 2% of $100,000 or $2000. Points exist so the lender can pay for the loan set-up expenses, as well as, make a profit.
Variable vs. fixed interest rates:
For some loans, the interest rate stays the same throughout the loan. This is known as a fixed rate loan. On other loans the interest rate can rise or fall as market conditions change. These "variable" rates are usually tied to some common market wide interest rate like the prime rate. The prime rate is a well-known rate that represents the rate that big banks charge their best big business customers. A variable rate loan might be described as being set at "prime plus two" which means the rate will always be two percentage points higher than whatever the current prime rate is.
The Institutions
Selecting a lender:
There are three kinds of institutions that can help:
Mortgage brokers
Banks
Specialized lenders
Mortgage brokers typically represent a number of money sources including regional and national banks, specialized lenders, insurance companies and even wealthy individuals. This diversity is their greatest strength. It means that they are likely to offer a wide number of options.
Working with bankers is another very popular way to get loans. If you have a good personal relationship with the lender and the lender offers a wide variety of loans, this can be a great route to go. If you don't already have a strong relationship with your banker, yet you are confident about getting the loan, this can be a good opportunity to start up that relationship.
Specialized lenders come in all shapes and sizes. These are generally lenders who specialize in one or two specific types of loans. There strength is that they are very knowledgeable about the options they work with and may have streamlined the processing to the point where they can offer very competitive rates. However, don't count on specialized lenders to introduce you to a wide range of options.
Specific financing options:
Savings:Many people prefer to save up the entire amount they need before undertaking a major home improvement or remodeling project. While, on the surface, this may seem to be a prudent approach, it does suffer from two significant shortcomings.
First of all, it means substantially deferring the actual improvement. If the change will really increase the livability of your home, do you really want to wait several years to save the funds?
If you already have the funds, would you be better off keeping them in reserve for emergencies rather than spending them all at once? More importantly, you have to look at the returns you can get on that money.
Credit cards:The main advantage of using credit cards or the cash advance checks that are often associated with them is that there is no hassle at all. You simply write a check and you've initiated a loan. Of course, the main drawback is that the loan is unsecured and therefore, carries a hefty interest rate that can be more than double the going rate for a first mortgage.
Cash-out refinance:
If you have enough equity, or if interest rates are lower now than when you first borrowed the money, this can be an ideal financing vehicle. You are basically taking two steps at once. First, you are refinancing your existing mortgage loan. If interest rates are lower than when you first financed, the savings can be considerable.
Home equity line of credit:
Home equity loans:
Very similar to home equity lines of credit, home equity loans are also very popular. There are three main differences. First of all, you can only borrow once and for a preset amount. Second, your payments and the interest rate are usually fixed. Finally, closing costs are generally higher than home equity lines of credit with one or two points being quite common. Basically, when compared to a home equity line of credit, you trade flexibility and higher closing costs for certainty about what your payments will be and how long they will go on.
Homeowner loans:
Like credit card loans, these are relatively low hassle loans. They can be for sums as high as $25,000. They are secured by the property, so the interest is tax deductible. However, the loan isn't limited as much by the equity in your home the way most loans are. They are primarily granted on the basis of income. So if you have high income but little equity in your home, this can be a good way to go. Because it is riskier than standard first or second mortgages, lenders usually charge about 3% more than they would for a standard first mortgage. The higher interest rate you pay is somewhat offset by lower closing costs, because there is no need for a formal appraisal and the paperwork is generally simpler to process.
Value added loans:
The way it works is that instead of lending you 80% of the value of the home as it exists today, the lender loans you 80% of the value of the home as it will be valued when the improvements are complete. Typically, these types of loans carry very competitive interest rates that can be quite close to first mortgage rates. In order to protect you and the lender, the funds are usually released in a series of payments called draws that occur as specific stages of the job are completed.
Contractor financing:
Often, when a contractor offers financing, he is simply using an established relationship with a lender to expedite the processing of your loan. In such cases, you will still be facing the same array of options you see described in this guide. However, there are a few firms that directly provide financing. This is most common with activities like replacing windows, installing siding, or putting in a swimming pool.
Homeowners have more options than ever for financing home improvements. While many projects add significantly to the value of the home, the primary reason for undertaking home improvements should be to enhance your day-to-day living.
David Hollies is a remodeling industry educator and consultant. He is also the founder of Washington D.C.-based Home Connections, Inc.
Credits to: http://www.servicemagic.com/article.show.Easy-Financing-Essentials-for-Remodeling.10401.html?oids=29c1c79
Debt Consolidation
People who are faced with mounting debts and unpaid bills would most probably have thought of the phrase ‘debt consolidation’. We hear it over and over again, but what exact does it mean? And how does it help those who are in heavy debts?
A common misconception is the debt consolidation is a loan. That is not true. The process of debt consolidation consists of reorganizing the outstanding amount that you owe to your creditors and paying them back under new terms and conditions. The advantages of debt consolidation are that it reduces the total overdue amount and it also decreases the interest rates. Another plus point to debt consolidation is that it can erase financial charges.
In other words, debt consolidation is a process through which the consumer enters into a new contract which helps him or her pay off the old debts with lesser monthly installments.
People often confuse debt consolidation with consolidation loan. However these two things are not the same. To put it simply, consolidation loan is a long term loan that is meant to help you pay off your current debts. The interest rates for a consolidation loan might seem low, but because this is a loan that you have to pay off over a long period of time, the end result is that you will end up paying a lot more money over the years. Because of this catch in consolidation loans, debt consolidation is most probably a better way of paying of your current debts.
Debt consolidation has many benefits to it. For a start, the process of debt consolidation works at doing away with or reducing your past interest and penalty. Another way of saving you money is by consolidating your credit cards so that you do not have to keep track of all the different bills and payment dates. Through debt consolidation all your bills and accounts will be consolidated into one, making payments and keeping track of payments easier for you. Another benefit of debt consolidation is that it reduces the average interest rate on the total amount that you have overdue. A fresh debt consolidation plan is also a good way of coming up with a new payment plan according to your current abilities. A competent consolidation consultant will ensure that new payment plan is structured according to how much you can afford to pay at that point in your life.
The bottom line of debt consolidation programs is to allow you to get rid of your debts as soon as is practically possible. The result of which is that you will at last be free of calls from your creditors and in the long run you will get a new chance to re-establish your credit rating and have a more relaxed life.
Credits to: http://www.bankruptcyhome.com/debtconsolidation.htm
A common misconception is the debt consolidation is a loan. That is not true. The process of debt consolidation consists of reorganizing the outstanding amount that you owe to your creditors and paying them back under new terms and conditions. The advantages of debt consolidation are that it reduces the total overdue amount and it also decreases the interest rates. Another plus point to debt consolidation is that it can erase financial charges.
In other words, debt consolidation is a process through which the consumer enters into a new contract which helps him or her pay off the old debts with lesser monthly installments.
People often confuse debt consolidation with consolidation loan. However these two things are not the same. To put it simply, consolidation loan is a long term loan that is meant to help you pay off your current debts. The interest rates for a consolidation loan might seem low, but because this is a loan that you have to pay off over a long period of time, the end result is that you will end up paying a lot more money over the years. Because of this catch in consolidation loans, debt consolidation is most probably a better way of paying of your current debts.
Debt consolidation has many benefits to it. For a start, the process of debt consolidation works at doing away with or reducing your past interest and penalty. Another way of saving you money is by consolidating your credit cards so that you do not have to keep track of all the different bills and payment dates. Through debt consolidation all your bills and accounts will be consolidated into one, making payments and keeping track of payments easier for you. Another benefit of debt consolidation is that it reduces the average interest rate on the total amount that you have overdue. A fresh debt consolidation plan is also a good way of coming up with a new payment plan according to your current abilities. A competent consolidation consultant will ensure that new payment plan is structured according to how much you can afford to pay at that point in your life.
The bottom line of debt consolidation programs is to allow you to get rid of your debts as soon as is practically possible. The result of which is that you will at last be free of calls from your creditors and in the long run you will get a new chance to re-establish your credit rating and have a more relaxed life.
Credits to: http://www.bankruptcyhome.com/debtconsolidation.htm
Student Loan After Bankruptcy
A student loan after bankruptcy is still a viable debt that needs to be repaid since these contracts aren't erased like other debts. The only way a borrower can dismiss these types of contracts is if his income possibilities are so limited that he cannot now, or ever (because of dire misfortune) pay the debt even though he's sincerely tried---and can prove all of this to an inquiring judge. Hopefully, the borrower's circumstances are not so severe because he can use student loans after bankruptcy to regain a better credit rating. The trick is to make the payments on time, every time, and even try to pay down the balance by making extra payments. If the contract has not been consolidated or negotiated or discussed with a financial counselor, then not all avenues of effort have been fully addressed. No matter what, young borrowers need to work closely and forthrightly with a trusted lender.
If the coed is able to double or even triple the minimum payments, success is on the horizon. Student loans after bankruptcy that are paid down will have the advantage of improving a person's FICO score, the three digit number that identifies that person as a credit risk or a credit star. It is worth the effort since this one commitment to "pay more" may mean that additional student loans after bankruptcy--even car and home loans--will not come with excessive, budget-killing interest rates later. Even making a year's worth of consecutive low payments on time shows good faith. Any effort to regain credit worthiness will play a significant part in a lender's decision. Bankruptcy itself may or may not have an impact on eligibility for federal student aid. By law, Title IV grants and loan aid cannot be denied just on the basis of a previous bad financial history.
Seeking a student loan after bankruptcy is an important step towards financial freedom. Federal contracts are especially helpful to borrowers because no repayment is required until 6 months after graduation. If there is still a question of delinquency or default, any school would be reluctant to add more financial risk to a young borrower, not to mention the financial risk it brings to the school. If parents are turned down for a federal contract because of bad credit, the coed can apply for an increased student loan after bankruptcy through an unsubsidized Stafford loan. The parents' credit history is not a problem for coeds unless they have parents co-signing the documents. If bankruptcy was caused by extraordinary circumstances, most lenders will try to find a way to grant a student loan after bankruptcy, if at all possible. No believer is exempt from handling money wisely. Proverbs 16:20 says, "He that handleth a matter wisely shall find good: and whoso trusteth in the Lord, happy is he." Our first source of wisdom is God. We must search His Word to help us find our way in the world, even as we apply for student loans after bankruptcy.
Credits to: http://www.christianet.com/studentloans
If the coed is able to double or even triple the minimum payments, success is on the horizon. Student loans after bankruptcy that are paid down will have the advantage of improving a person's FICO score, the three digit number that identifies that person as a credit risk or a credit star. It is worth the effort since this one commitment to "pay more" may mean that additional student loans after bankruptcy--even car and home loans--will not come with excessive, budget-killing interest rates later. Even making a year's worth of consecutive low payments on time shows good faith. Any effort to regain credit worthiness will play a significant part in a lender's decision. Bankruptcy itself may or may not have an impact on eligibility for federal student aid. By law, Title IV grants and loan aid cannot be denied just on the basis of a previous bad financial history.
Seeking a student loan after bankruptcy is an important step towards financial freedom. Federal contracts are especially helpful to borrowers because no repayment is required until 6 months after graduation. If there is still a question of delinquency or default, any school would be reluctant to add more financial risk to a young borrower, not to mention the financial risk it brings to the school. If parents are turned down for a federal contract because of bad credit, the coed can apply for an increased student loan after bankruptcy through an unsubsidized Stafford loan. The parents' credit history is not a problem for coeds unless they have parents co-signing the documents. If bankruptcy was caused by extraordinary circumstances, most lenders will try to find a way to grant a student loan after bankruptcy, if at all possible. No believer is exempt from handling money wisely. Proverbs 16:20 says, "He that handleth a matter wisely shall find good: and whoso trusteth in the Lord, happy is he." Our first source of wisdom is God. We must search His Word to help us find our way in the world, even as we apply for student loans after bankruptcy.
Credits to: http://www.christianet.com/studentloans
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