Home Owner Seek Home Improvement Loans While Interest Rates Still Low

A Home Buying Article Contributed by Elizabeth Fox-Wise

Applications for Home Improvement Loans Have Increased in 2004

The current low interest rates on all loans have enticed many home owners to seek a Home Improvement Loan. Now seems like a great time to draw money off of the equity you have built in your home and make the improvements that you have been wanting to make. Last week, rates as low as 4.6% were being offered on Home Improvement Loans.

As a result of these low Home Improvement Loan Interest rates, thousands of American home owners have taken Home Improvement Loans in 2004 and it is expected that many more will before year end. Economists are predicting that we will see a rise in interest rates before the end of the year, and a continued increase as we head through 2005. Homeowners, in record numbers, are rushing to secure Home Improvement Loans before today's low rates are just a distant memory.

How Does a Home Improvement Loan Work?

Typically, a home owner will take a Home Improvement Loan from the lender who has financed the mortgage on the home. The home owner must lay out a plan for home improvements that he wishes to make including costs of all improvements and actual estimates from the contractors you will use. This information is then presented to the lending institution as part of your Home Improvement Loan Application.

The Home Improvement Loan is given against your original mortgage. Usually the Home Improvement Loan is extended for whatever time exists on the original mortgage. For example, if you had take a 30 year mortgage and there are 15 years remaining on it when you apply for a Home Improvement Loan, if granting your loan, the lender will set terms at 15 years so it ends when mortgage ends.

If the Home Improvement Loan is granted, the money is paid out in increments at the rate that the construction work is done and it is usually paid directly from the lender to the contractor to whom it is due. Occasionally, the money may be given to the borrower but only if he/she produces the receipts for reimbursement of payments to the contractor.

What Can You Get a Home Improvement Loan For?

Home Improvement Loans are usually granted for improvements that will increase the value of the home and sometimes for repairs to help home hold it's value.

Some examples of the home improvements which will add the most value to the resale price of your home include kitchen remodeling, second story addition, bathroom remodeling or addition, family room remodeling or addition, bedroom addition and deck.

If the Home Improvement loan money is used for Capital Improvements then the interest paid on the Home Improvement Loan is tax deductible. If the loan money is used for repairs; however, then it is not tax free. Unlike a mortgage, there is never a tax break for the portion of the loan which is applied to principal, only to interest if the loan qualifies.

Using the equity in your home, through a home improvement loan, to put back into the home and improve it's value, is often a very smart move that you will be glad you did at the time of selling the home.