A home improvement loan is any type of financing you use to renovate your home. Learn about each type of home improvement loan and how they work. A home improvement loan works by providing you with the money you need to maintain, repair, or improve your home. You can choose between different types of funding for your project, so compare your options carefully to learn the pros and cons of each one.
A home renovation loan gives homeowners access to the funds needed to fix their home. These renewal loans can come in the form of mortgages with integrated fixed-equity financing or personal loans. Depending on the type of loan you receive, you may need to prove that the money was spent on the home or paid to a contractor. Home improvement loans can help finance projects in and around your home, and they work much like other installment loans.
The biggest difference between the two main types of home improvement loans (personal loans and home equity loans) is that a personal loan is not secured. Conversely, a home equity loan is secured by your home, so you could lose your home if you can't repay it. Because the difference between your old mortgage and the new loan can be pocketed, you could use the extra dollars from a cash-out refinance to make improvements to your home. Home improvement loans are a little inadequate, as they are actually different types of loans or lines of credit that can be used to finance all types of home repairs, from structural damage to room renovations and even accessibility or energy efficiency improvements.
You don't need to have a Philadelphia contractor's license if you only perform home improvement work on one- or two-family homes (excluding electrical, plumbing, and firefighting). In addition, you can get a tax deduction for interest you pay on a home equity loan, HELOC, or cash-out refinance if you use the money to substantially improve (rather than do basic repairs or maintenance) your home. While home improvements often refer to construction projects that alter the structure of an existing home, they can also include improvements to lawns, gardens, and outdoor structures, such as gazebos and garages. They are for renovations that improve the “basic livability or utilities” of your home, according to HUD.
Home equity loans have much higher loan limits and repayment periods than home improvement loans. Home improvement loans are financing options for homeowners who want to improve their homes and can pay off long-term debt. The concept of home improvement, renovation, or remodeling is the process of renovating or making additions to one's home. Personal loans are a type of installment loan that can be used for multiple purposes, including home improvement expenses.
A home improvement loan generally refers to an unsecured personal loan that you use to pay for home renovations. However, the money should go towards renovations that improve the livability of the home, and some improvements may not qualify. You can apply for a home improvement loan to repair damage after a natural disaster, improve your plumbing, or build an addition just to name a few of the many possible projects. You can apply for permits for home improvement work using your PA Home Improvement Contractor Registry.
As long as the funds are used for permanent repairs that improve the use and livability of the property, you are ready to go; you can even use the money to purchase certain appliances or renovate non-residential structures, mobile homes and manufactured homes. Under the Consumer Protection for Home Improvement Act, any work performed under the emergency work provisions of Section 201-7 of the Pennsylvania Unfair Business Practices and Consumer Protection Act is not considered an improvement.