Here’s How Your Home Equity Can Get You The Best Home Improvement Loan

When you need to upgrade or renovate your home, you don’t want to skimp. If you’re planning to go to all the expense and inconvenience to renovate your home, you need enough money to do it right. One place where you already have extra money is in the equity of your home. The equity is the difference between the saleable value of your home and the amount you still owe on your mortgage.

Home Equity Loan

A home equity loan is similar to a second mortgage. The loan is given with your house as collateral. If you cannot make the monthly repayments, your house could be sold by the lender to repay the debt. There are two main types of home equity loans.

  • A home equity line of credit
  • Second mortgage loan

You can use your line or credit by writing checks, personally visiting the lender or bank to withdraw money, or, in some cases, you may get a debit card.


Each type has its benefits. A second mortgage is just like any secured loan with a fixed amount loaned and a fixed interest rate with your home as collateral. A line of credit is more like a credit card. You may borrow a specified amount for a line of credit for your home renovation, but only pay interest when you actually use it.

Both types have a lower rate of interest than other types of secured loans. A line of credit offers more flexibility allowing you to borrow in stages. They both also have tax advantages. The interest you pay on the first 100,000 pounds is tax deductible. Also, both are good types of loans if you have bad credit. Since your house is collateral, it is possible to get the loan.


The biggest disadvantage is that you could lose your home. To prevent this, you may need to get payment protection insurance to make your loan payments in the event you are unable to work or continue to have an income.

The Application

If you want to apply for a home improvement loan, there are a few things the lender will ask you. They will first calculate the amount of equity you have in your home. They will also want to know what your annual income is as well as any other debts you have on which you need to make monthly payments. Finally, they will look at your credit history. This will tell them if you have a history or responsibly repaying debt or if you are high risk.

A home equity loan is a good way to fund renovating your home if you have an estimate for the work and know basically how much it will cost. If you have a few different renovation projects and aren’t sure how much each one will cost, and if you plan to do them at different times, then a line of credit is your best option. The most important thing to consider is if you can make the regular repayments on another loan.

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