Finding funding may be a project itself, depending on the scope of your home improvement plans, For smaller projects, you may be able to save for it from your regular household budget. But for major projects, you will probably need financing. It may be possible to borrow against the cash value of your life insurance policy. Talk to your life insurance agent for information about this option.
Contact your bank, savings and loan, or credit union for information about home improvement loans. Compare interest rates, repayment options, and penalties from a few lending institutions before selecting one of the following options:
Second mortgage: A second mortgage is loan against the equity in your home, in effect, an additional mortgage. Typically, financial institutions let you borrow up to 80% of the appraised value of your home, less the balance on your original mortgage. For example, if your home is appraised at $100,000 and your current mortgage balance is $70,000, you may be able to obtain $10,000 by a second mortgage. You may also have to pay all the fees normally associated with a mortgage, including closing costs, title insurance, and any fees. Your tax advisor can tell you if the interest on a second mortgage is tax-deductible.