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Using a second or third mortgage to pay for home improvements helps you keep or increase the value of your house. Because the value of your home secures home equity loans, your mortgage rate will be lower. Second mortgage interest is also deductible under some tax laws.
It’s important to know what kind of financing you’re getting before you sign anything. Also, spend some time looking for lenders with low-interest rates and fees.
Make Improvements To Your House First, Then Move On
Before looking for home improvement financing, create a realistic budget that includes projected cost overruns. This is the time to get at least three quotes for the project from different contractors so you can compare them. Price out materials and rental fees if you intend to do the work yourself.
Consider a home equity line of credit for projects costing less than $2,000, to begin with. There are usually no application fees and low fixed rates with this type of financing for the first couple of years. Additionally, you can use your principal more freely with credit lines because you only pay interest on what you borrow.
If your projects are more substantial, you’ll benefit from lower long-term rates with a second or third mortgage. Closing costs are more easily recovered with a low fixed rate if you have more time to repay your loan.