You can use all,
or part of your home equity loan for
remodeling or home improvement. Lenders
usually do not place restrictions on the
projects to be done. Depending on the
extent of your project, you typically
have the choice of doing the improvement
work yourself, or using a contractor.
Using a home equity loan for home
improvement provides a fully amortized,
fixed rate installment loan, or a credit
line offers the flexibility of drawing
money as needed. Placed in second
position on the property title, there is
no change in the terms or the payment of
your existing first mortgage. The
disbursement checks can be made payable
to you, or to you and your contractor.
You typically have a choice of loan
terms from 5 to 20 years. If you
currently have an equity loan or an
equity credit line, it must be paid off
with the new loan, so be sure to include
the amount. Also, many lenders will lend
as high as 125% of the current value of
your home.
A home
equity loan for remodeling or
improvements can also provide you with a
new tax deduction. The interest
deduction for a loan used for home
improvement can exceed the usual
limitation for home equity interest
deduction. Check with your tax advisor
for details.
|
