I don’t know if you’ve been watching the progress of our screen porch via my Facebook account, but it’s pretty cool to see it all come together. I have to say, with the arrival of our twins, I didn’t think we’d ever really put one on our house. Both Julie and I grew up in parts of the country with basements-some finished and some unfinished. All the folks we knew who found a way to afford converting their unfinished basement to finished square footage often claimed it was the best thing they ever did. The comment that immediately followed always was “I wish we had done it years ago.”
The reality is that with four children the days of extra money have been permanently kicked to the curb. Yet, we didn’t want to wait 15 years to put one on and inevitably say “we wish we had done it years ago” too. The market condition also swayed our decision as well. What’s happening in the economy has impacted everyone and there are some great opportunities emerging as merchants try to tempt us with some terrific pricing. The same thing is happening in the area of home improvements. For our porch, labor is infinitely more available as home building has slowed. That, coupled with a lower cost of materials, means that we are paying less for the same porch we initially looked at a year ago.
To help make this all happen, I investigated some various financing options to help make our dream a reality. Let me share with you the type of loans that surfaced:
Type A: Cash out style loan that changes the current loan you have. It’s a great program that gets you a new loan in the repayment years you desire (e.g., 30yr, 20yr.) at a relatively competitive rate. Yet, we had such a low interest rate at the moment that we couldn’t get using this option, I opted to pass on this loan type.
Type B: HELOC, a Home Equity Line of Credit. This is basically when you pull some equity out of your home for whatever you want. Some loans are adjustable based following the prime rate and some are fixed. There are many guidelines associated with HELOCs and one is staying within Texas state guidelines that require a minimum 20% equity in your home. Given the change in home values, we didn’t meet this mark.
Type C: Home Improvement loan. This is a loan that allows you to obtain financing if you are doing a specific home improvement (e.g., pool, kitchen remodel). The bank checks to ensure you have adequate equity in your home without the additional value added by the improvement and can allow you to go up to 95% of your home equity. If you want to do a home improvement, this is the option leveraged. The only downside is that you have to get your contractor or company (e.g., pool company) and your project proposal approved by the lender first.
It you are considering a home improvement or are interested in pulling some equity out of your home, I’d be happy to discuss the options available to you.