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Conventional loans for construction and remodeling

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Updated: 3/27/2003 4:09 pm
Buying a home is an enormous financial investment. One way to protect or increase its value in the future is through home improvement, whether it's building a patio or installing new carpeting. If you don't have cash readily available to finance these projects, it's possible to take out conventional loans from a private lending institution, like a bank or credit union, to pay for any construction or remodeling done on your home. Typically, if you qualify, lenders will let you borrow, through a second mortgage or a home-equity loan, up to 80 percent of the appraised value of your home, minus the balance on your original mortgage. The interest rate, repayment terms, and payment schedule, however, will vary among different lenders. Be aware that some conventional loans allow you to do the work yourself, while others may require you to hire a contractor. Whatever the case, make sure you thoroughly understand the terms of the conventional loan before you proceed with your projects. Considering that homeowners frequently recoup (re COOP) 100 percent or more of their investment when they sell their home, it can be highly beneficial to take out a conventional loan to carry out home improvement projects to further increase your profit. Furthermore, the interest portion on these loans is often tax deductible. Visit your local bank, savings and loan institution, or credit union and compare interest rates, repayment options, and penalties before deciding on which home improvement loan program is right for you.

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