Loan Type Select One Purchase Home Equity Refinance Debt Consolidation FHA/VA State Select a State Alabama Alaska Arizona Arkansas California Colorado Connecticut D.C. Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Credit Rating Select One Excellent Good Fair Poor View Privacy Policy

Home Improvement Loan Rates are Available in a Variety of Formats Staff - Mortgage Lenders Plus.com

Home improvement loans are available in a variety of formats. The most common home improvement loan is a home equity loan, which is in effect a second mortgage taken out against the equity that the borrower holds in the house. The loan is collateralized by the homeowner equity, which is the difference between what is currently owed on the primary mortgage and the home’s current value. As of this writing (early February 2007) home equity loans are available at rates between the 8.25% and 9.25% interest ranges, depending upon the borrower’s credit rating.

Rates vary according to the length of the loan, so when you’re shopping be sure to look at ten and fifteen year loans to see the difference in interest rates. The interest applied to a home equity loan is tax deductible, just as the interest on a primary mortgage. Typically, these equity-based home improvement loan rates are fixed and not subject to any adjustable rate formula.

There are extremely inexpensive home improvement loans available through a number of programs sponsored by HUD, provided primarily for homeowners in the low and moderate income ranges. Some of these loans are folded into primary mortgages, so that the borrower can purchase a “fixer upper” with the loan and use additional funds provided in the mortgage package to complete home improvements. These loans are usually provided through state or local agencies charged with executing HUD and Community Development federal programs. There are also commercial lenders that participate in the HUD home improvement loan program (called the 203(k) program) with underwriting provided by the government agency.

Then there are the non-collateralized home improvement loans, offered to homeowners who do not have sufficient equity in their home to qualify for a home equity product. These loans are the offerings you see splashed across late night TV or advertised on home affiliated web sites, offering cash at rates that “are better than some credit cards.”

Obviously, non-collateralized home improvement loans are going to be at double digit interest rates. It is this type of loan, moreover, that often has a trap door or two in the fine print. If it is an adjustable rate loan, make sure you understand the adjustment program and what caps are in place to protect you from outrageous rate hikes. You should also avoid loans with prepayment penalties and other types of surcharges.