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Financing Home Remodeling as a Tool

August 1st, 2012 Posted in About The Remodeling Process

Most people finance the purchase of their home with a long-term mortgage, spreading the payments over 15 or 30 years. A mortgage is a financial tool that provides a couple of benefits: It makes a new home affordable, and the interest paid on the mortgage may become a tax deduction.

Home mortgages are such a useful financial tool that very few pay cash for their home. Even for those that can, many financial advisers suggest that it’s better to use the flexibility of a mortgage than it is to tie up all of your available cash, which can often be invested for a higher return than the cost of the mortgage.

A remodeling project is a long-term investment in the value, convenience, and marketability of your home. As such, it makes sense to use the same type of financial tool – a mortgage – to help you make that investment. There are special remodeling loans available and loans that include the value of the proposed improvements to determine the equity in the home, thus allowing you to finance more of the project.

Financing means you don’t have to deplete your savings account, and can have cash available for emergencies or other uses. And because the loan is secured by your property, the interest on the loan will most likely be tax-deductible. (You should always consult your tax advisor regarding deductibility.)

Looking for a Lender

It’s very important to find a lender who is familiar with home improvement lending. Financing an improvement requires some specialized knowledge of the remodeling process.  Look for a lender that offers flexibility. Each home improvement project is unique, and every homeowner’s situation is unique. Some people want a short loan term; others need a longer term with lower payments. Some people just want to pay for the project, others may want to use the loan to pay off some other bills as well and increase their cash flow. Make certain your lender can tailor your loan to fit your particular needs.

(source of article: Oregon Remodelers Association)

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