Having new additions made to ones house is one of the most exciting things that one looks forward to. Additions can be anything. They can be the instillation of an air conditioner to building another floor to your house. These additions, even though exciting, should be carefully planned out, and the source from where the required funds are to be obtained are to be calculated with great detail. There are a few important points that are to be kept in mind, before you go ahead and decide to make an addition. These can be basically categorized into the following:
* How much can be borrowed?
* How much is my income?
* What are the options that are within my capabilities?
* What are the other options that are available? etc
Ones you have the above questions answered, then these are some of the options that will be open to you for your financing needs.
1. Home Equity loan- a home equity loan is a type of a mortgage that aids you in tapping your home equity. It generally carries a comparatively higher are of interest rates, but they have a closing rate that is lower. The home is given as a security and thus the interest rate that is charged is lower than that of an unsecured loan this source enables you to receive all your money at once, and is thus suggested if your addition requires a lump sum payment in the beginning.
2. Mortgage Refinancing-when there is a stash of equity built up in your house, then it is possible to refinance your existing mortgage with one that is higher, and then use the balance cash that is made available for your home additions. It may also be possible to retain your monthly payment.
3. Home Equity Line of Credit (HELCO) - it is the line of credit that is secured by the value of the house. This option is suggested if the payment is done in stages or if it is undertaken by you yourself. HELCO may provide you the option of paying just interest or other schemes.
4. Personal Loan- this line of credit is suggested only if the addition made is small. They generally carry a normal fee, as the house is not kept as security. The interest rate of this option is comparatively high and the only drawback is that this source is not tax deductible.