Goldman Sachs Private Equity Article
Getting an Equity Loan for Your Home Improvement Funding Needs
When you own your own home, sooner or later you will need or want to make repairs or upgrades, which can get rather expensive, depending on the nature of what you need to do. Unless you have significant money set aside in savings, as few people usually do, you will likely need to take out a loan to get the funds that you need for the project, usually in the form of a home equity loan or home improvement loan. You can get a home equity loan to do many different types of repairs and upgrade to your home, such as purchasing and installing new carpeting or tile, wallpaper or painting, structural repairs, roofing maintenance, remodeling, etc. In short, you can get a home equity loan for just about any major home repair or renovation project that you plan to undertake.
As with any loan, the amount of money you will be able to get depends on many different factors. If you apply with a lender that you have already established a good relationship with, you may be able to get more money than you would with an unknown lender. You may be able to borrow the maximum amount, meaning that you can borrow against all of the equity that you currently have built up in your home. If you go with a lender that you have had no prior business with, you may only be able to get eighty percent, or less. The terms on these loans also vary greatly from lender to lender, typically, home equity loans are fifteen year loans, but some lenders will stretch that out for a longer period of time to make it easier for the homeowners, while others will shorten the time period, especially on a small loan. Your best bet here would be to talk to several different lenders and find out how their typical home equity loans work, so that you can make a better decision when it comes to choosing the lender that will be right for you.
You also have a couple of options when it comes to your interest rates as well. Of course, the better your credit is the better rate you are likely to get, so keep that in mind. You may be able to choose between an adjustable rate or a fixed rate. A fixed rate loan means that whatever interest rate the lender gives you when you take the loan, it will remain the same for the life of the loan, meaning that your monthly payments will also remain constant. With a fixed rate loan, your interest rate, and your payment amounts, will fluctuate depending upon the current market, meaning that some months your payments may be low, and then suddenly increase. This can make it difficult to plan your budget each month, but it can possibly save you some money in interest charges.
Your lender may also have other stipulations that are put into the loan. Some lenders require that all work be done by a certified or licensed contractor, which means that you will have more money spent on labor costs than you may have initially planned. Some lenders may also require you to report to them what the money has been used for, and will want to come to your home to take pictures and do an appraisal once the work has been finished, but this is usually something that only happens on rare occasions.
