Another good tip is to keep your home improvements simple and neutral whenever possible. While you may be an avid gardener, potential homebuyers may not be, so they won't be enticed by a house with a yard that requires a lot of upkeep. Additionally, if you repaint rooms, choose warm, earth tones. This neutral palette will help homebuyers envision themselves and their furniture in the space. Bright reds, exotic yellows and Caribbean blues may distract potential buyers.
To determine the loan amount, lenders use the loan-to-value ratio (LTV), which is a percentage of the appraisal value of your home. The usual limit is 80 percent—or $100,000 for a $125,000 home (.805125,000). Lenders subtract the mortgage balance from that amount to arrive at the maximum you can borrow. Assuming your balance is $60,000, the largest loan that you can obtain is $40,000 ($100,000-$60,000=$40,000). If you have a good credit rating, a lender might base your loan on more than 80 percent of the LTV; if you don't, you might get only 65 to 70 percent. While many lenders go to 100 percent of the LTV, interest rates and fees soar at these higher ratios.

To make sure you are getting the best deal, comparison shop with several lenders, including your mortgage servicer. Requesting a pre-approval or applying for several remodeling loans won’t damage your credit—McBride says the credit bureaus lump similar applications into one inquiry – but it will help you to find the lowest interest rate and the best terms.
There is a catch, however. Unlike other lenders like SoFi or Marcus, LightStream does not offer pre-qualification. This can be problematic if you want to see what your interest rate will be, but don’t want the hard pull to show up on your credit history. That aside, if you have an established credit history, it’s hard to pass up the competitive and flexible terms LightStream offers.
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One advantage of these loans is that borrowers can get them very quickly—within a few days or even the same day—less time than it typically takes for a bank to approve a home-equity-based loan or line of credit, says Steve Allocca, LendingClub's president. What's more, you're not putting your home at risk when you borrow this way because it's not used as collateral against the loan. 
Cash is usually preferable to accumulating more debt. However, with the average major kitchen remodel costing $54,909 and a bathroom remodel averaging $16,128, it could take decades before you've saved enough to do your projects and actually enjoy the results. For small projects, however, if you're able to save enough in cash, this is probably the best way to go.
SoFi is known for student loan refinancing, but the online lender also offers personal loans for house remodeling. You can borrow as little as $5,000 or as much as $100,000 and repay it over two to seven years. SoFi loans also come without origination fees and prepayment penalties. They even have an unemployment protection program that can temporarily pause your payments if you lose your job.
To qualify for a home remodeling loan, you will need a good credit score and enough monthly income to comfortably pay for all of your debts, including the monthly loan payment. While qualifying for remodeling loans isn’t as difficult as qualifying for a mortgage, “lenders will be very diligent about verifying debt ratios,” McBride said. So, be prepared to supply a lot of paperwork to prove your financial standing.
Loan shopping often starts with mainstream mortgages from banks, credit unions, and brokers. Like all mortgages, they use your home as collateral and the interest on them is deductible. Unlike some, however, these loans are insured by the Federal Housing Administration (FHA) or Veterans Administration (VA), or bought from your lender by Fannie Mae and Freddie Mac, two corporations set up by Congress for that purpose. Referred to as A loans from A lenders, they have the lowest interest. The catch: You need A credit to get them. Because you probably have a mortgage on your home, any home improvement mortgage really is a second mortgage. That might sound ominous, but a second mortgage probably costs less than refinancing if the rate on your existing one is low. Find out by averaging the rates for the first and second mortgages. If the result is lower than current rates, a second mortgage is cheaper. When should you refinance? If your home has appreciated considerably and you can refinance with a lower-interest, 15-year loan. Or, if the rate available on a refinance is less than the average of your first mortgage and a second one. If you're not refinancing, consider these loan types:
Homeowners with limited equity can get an FHA Title I loan for improvements that make a home more livable and useful, including accessibility improvements and energy conservation improvements. These loans can’t be used for luxury items such as swimming pools or outdoor fireplaces, however. Loans for less than $7,500 are usually unsecured; the most a homeowner can borrow is $25,000 for 20 years to improve a single-family home. The lender determines the interest rate. You’ll need to find an FHA-approved Title I lender to get this type of loan. As with any loan, you’ll need good credit and a demonstrated ability to repay the loan. 
Until recently, borrowing money for a new kitchen, second-story addition, or other home improvement meant going to the bank, seeing a loan officer, and hoping for the best. Today, however, you have many more options to help finance home improvements. A mortgage broker, for example, can offer more than 200 different loan programs. And brokers are just one of the many lenders eager to put together a loan that fits your situation—even if your credit history is less than perfect.
Home loans using home equity as collateral are the most common and offer the biggest loan amounts, according to Greg McBride, senior financial analyst for Bankrate.com. However, “Lenders are looking for homeowners to retain a 15% equity stake after the loan,” McBride said, so you’ll need a fairly large amount of equity in your home just to qualify.
Home-equity lines of credit. These mortgages work kind of like credit cards: Lenders give you a ceiling to which you can borrow; then they charge interest on only the amount used. You can draw funds when you need them — a plus if your project spans many months. Some programs have a minimum withdrawal, while others have checkbook or credit-card access with no minimum. There are no closing costs. Interest rates are adjustable, with most tied to the prime rate. Most programs require repayment after 8 to 10 years. Banks, credit unions, brokerage houses, and finance companies all market these loans aggressively. Credit lines, fees, and interest rates vary widely, so shop carefully. Watch out for lenders that suck you in with a low initial rate, then jack it up. Find out how high the rate rises and how it's figured. And be sure to compare the total annual percentage rate (APR) and the closing costs separately. This differs from other mortgages, where costs, such as appraisal, origination, and title fees, are figured into a bottom-line APR for comparison.
Homeowners looking for ways to pay for a home improvement have a lot of choices. Taking out a home equity loan, doing a cash-out refi or getting a personal loan are just some of the possibilities depending on your personal financial situation. With NerdWallet’s financing calculator, we help you identify the financing choice that saves you the most money.

You might be eligible for a Title I Home Improvement Loan. A Title I loan is a great option because it's guaranteed by the FHA in the event that you default, so it's a low-risk loan from the standpoint of the lender. Also, it might be your best bet if you have limited equity in your house because Title I loans under $7,500 don't require any pledge of equity.[3]
HELOCs come with a draw period and repayment period. During the draw period, which often lasts about 10 years, you can spend the money in your credit line. Your monthly payments would cover mostly the interest and a little bit of the principal on any outstanding balance. During the repayment period, which typically lasts around 15 years, your monthly payments would probably be higher because they’d include more principal.

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Many people turn to home improvement loans even though saving up and paying cash for home improvements is often the least expensive option. After all, when you pay cash, you don’t have to pay interest. However, sometimes home improvements come in the form of emergency repairs, and paying interest on a loan is less costly than saving up to pay cash while your roof leaks for months and causes mold, rot and damaged ceilings that will cost even more to repair later.
If you have very good to excellent credit, you can probably get approved for a new credit card that will charge you no interest on new purchases for nine to 18 months. Cards that have such an offer as of Dec. 5, 2016, include Chase Slate (0% APR for 15 months, no annual fee) and Capital One QuicksilverOne (0% APR for 9 months, $39 annual fee). Many other offers are available from both credit unions and banks. 
A home equity loan lets you borrow a lump sum all at once, while a HELOC lets you draw on a line of credit as needed for a certain number of years, called the draw period. During the draw period, you only have to repay interest on the loan, which makes monthly payments quite small but can result in payment shock later when the draw period ends and the borrower has to start repaying principal too. In addition, a HELOC has a variable interest rate, while a home equity loan has a fixed interest rate. A HELOC’s initial rate may be lower than a home equity loan’s, but over time it can become higher if market conditions push interest rates up. (For more, see Choosing a Home Equity Loan or Line of Credit.)
Refinancing costs: Because you’re getting a brand new home loan, closing costs can make refinancing expensive. Also, you’re extending the life of your loan, so the new monthly payments will mostly go toward interest payments instead of reducing your loan balance. But, if you have sufficient funds on hand, you can always pay extra and eliminate your debt early.
A “home improvement loan” is usually an unsecured personal loan that is used to pay for home repairs and improvements. An unsecured loan does not require you to put up an asset, such as your house, as collateral. Home improvement loans can range from $1,000 to $100,000, with interest rates from 5.99 percent to around 36 percent if your credit is bad. Personal loans have a fixed interest rate and a fixed monthly payment and are available at traditional banks, credit unions, online lenders and peer-to-peer lenders.
A personal line of credit is similar to a personal loan, except that instead of borrowing a lump sum all at once, the borrower can draw upon a line of credit as needed for a certain number of years. A line of credit can help homeowners avoid borrowing more than they need to by letting them access cash only as they need it. But for homeowners who don’t carefully track their borrowing, a line of credit can make it easy to borrow more than intended. Many small draws on the credit line over time can add up to a large total amount borrowed.
What’s more, sometimes making a necessary change to a house to keep it livable makes more sense than moving, even if you have to borrow. And some people just won’t want to wait to make upgrades; they’ll prefer to borrow now for that nice kitchen and pay off the project over time. Whatever the reason, if you’re going to borrow money for home improvements, you should know what your options are and which ones might be best for your situation.
In a cash-out refinance, you get a new loan to replace your mortgage, but instead of borrowing the same amount you currently owe, you borrow more. Let’s say your home is worth $240,000 and you owe $120,000 on your mortgage. If you did a cash-out refinance, you could get a new loan for $192,000. After paying off your $120,000 mortgage, you would have $72,000 to put toward home improvements (or any other purpose, such as sending your child to college).

The catch is that to keep the 0% rate, you will likely be required to make minimum monthly payments on time every month, even during the 0% introductory period. You need a clear plan for repaying the full amount you borrow before the introductory period ends, or else you will have to pay interest on the remaining balance, usually at a much higher rate.
Home loans using home equity as collateral are the most common and offer the biggest loan amounts, according to Greg McBride, senior financial analyst for Bankrate.com. However, “Lenders are looking for homeowners to retain a 15% equity stake after the loan,” McBride said, so you’ll need a fairly large amount of equity in your home just to qualify.
Whether you want to give your kitchen a fresh look, build the deck you’ve wanted, or want to make a few bigger home repairs, one of the decisions you’ll face is how to pay for your home improvement. Sure, you could use your credit cards or maybe take advantage of in-store financing, but one of the most convenient ways to pay for larger projects is with a home improvement loan.
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