Many homeowners eventually are faced with a decision between buying a new home or remodeling a current one.
The pros and cons of each are quite obvious. Buying a new home is exciting. You get to live in a new space and start a "new" life.
But the cost is tremendous. By remodeling your current home, you can give it a fresh new look, even though it's still the same house.
The cost is infinitely more manageable.
Taking out a Home Improvement Loan
Although home remodeling is usually much cheaper than purchasing a new home, many people still need to take out a home remodel loan in order to finance their projects.
Even simple things like cabinet refacing or building a new porch often end up costing much more than anticipated. Without ready capital, it is usually necessary to either take out a second mortgage or secure a home improvement loan.
Finding Collateral for a Home Remodel Loan
Although some home improvement loan types can be secured through personal assets, stocks, and things of that nature, many homeowners use their existing property as collateral.
This is why a home remodel loan is sometimes referred to as a second mortgage or home equity loan. An individual basically borrows capital against the underlying value of her property.
The payoff, however, is potentially quite high. Besides the personal enjoyment one derives from living in a remodeled home, it also ends up increasing the overall property value.
Retiling floors, adding a pool, or installing newer pipes or fixtures can help homeowners fetch a higher asking price when it comes time to sell later down the road.