If you are seriously considering researching home equity loans then one of the best uses you will find for the loan is for home improvements, which indirectly also help you improve the value of a home and give you good return on the home equity loan. Home improvement projects are potentially expensive, yet they are still valuable in that they do add value to your home. However, this is usually dependent upon the nature of works involved and the finished project.
Some of the home improvement projects that people undertake allow the homeowner to recoup as much as 80-90% of the whole project expenses, and this immediately increases the home’s value. An average home improvement projects returns about 78% of its cost back to the home value, while other projects get back less than 70% of the project value.
Before you get any returns, a realistic rising real estate market value of a home improvement project will have a compounding effect that will be apparent in the years to come. This means that the results of the return on investment may not be apparent or immediate but will be evident over time. Here are a few ways in which you can get maximum returns on home improvement projects with equity loans.
Aesthetics and home location are important factors; however there are attributes that are more tangible in determining the value of a property. For instance, a 2,000 square foot home will be much more valuable than a 1,600 square foot home, while a home with three bedrooms will usually be more valuable than one with two bedrooms only. Turning a home into a castle may not add as much value if the location or neighbourhood is not right.
Home improvement projects bring in a practical return on investment, though less tangible. This can include aesthetic projects, upgrades and basic repairs that eliminate anything that is a turn off to potential homebuyers. On the other hand, home improvement projects enhance a home’s valuation, by extending the home or adding a swimming pool, are changes that not every buyer required, but they add to the home value. If you are planning to stay in the home longer, home improvements will make your stay there more pleasurable.
Retirement Home Equity Loans
Anyone can take out an equity release loan as equity release if they have a home and any equity value in their property. However, there are a select few who can take out a mortgage that is not repaid until death or they move to a long term care facility. Retirees are able to gain a lifetime mortgage which is also an equity loan. This loan allows you to remove a certain percentage of equity from your home value. You can use this money as a lump sum, instalments, or a combination of both. The interest adds onto your mortgage for the length of time it is outstanding, in terms of being repaid. You do not make monthly payments for this type of loan. Instead the repayment is at the end, which is why many like this concept as retirees. You get the money you need to make home improvements without making a monthly payment.
You can make a payment if you wish by choosing the interest only option. In this case you do not pay on the principle, but the principle balance does not increase because the interest is being repaid on a monthly basis.
If you wish to repay the home equity loans back early whether traditional or lifetime mortgage package, there can be a penalty fee. This fee is set by the company so make certain to check the fine print of your loan contract. For lifetime mortgages you also want to check for a no negative equity clause in which you are guaranteed never to owe more than your house value even if devaluation occurs.
To take advantage of this mortgage you need to be 55 or older. You also need to own your home preferably without any other mortgage on it as you do not want to end up paying two mortgages. The reason for this is that your home equity mortgage is paid first and if the housing value does not cover it the other outstanding mortgage may need to be paid by your beneficiaries.
Always remember that inheritance is as much as you make it based on the home equity loans you take out. The more funds you use for home improvements the less that might be left over for your relatives in the end. On the other hand you are increasing your property value.