Financing Home Improvements Now Easier Than Ever

With winter just around the corner, homeowners might be considering projects to improve their home for cold weather. Or perhaps they are simply looking to remodel or update their home. Considering new windows to replace those with "old-world-charm"? What about a new heating system to save on utility bills? Or, is that avocado green tile and matching appliances in your kitchen crying out for a remodel? Whatever the reason, there are several easy ways to finance home improvements. The secret to success is finding the right financing option for you.

Refinance with cash out

Experts agree that home improvements are a great way to increase the value of a home. For homeowners who haven't recently refinanced and are in the market to remodel, taking cash out from a home refinance could be the right option. Homeowners should make sure it makes financial sense to pull money from equity in a house suggests, Lori Vella, senior vice president of National Retail Lending at Washington Mutual. "Improving your home is almost always a smart investment, especially in this rate environment. Just make sure you'll be in the home long enough to recoup the cost of refinancing," says Vella.

Affordable mortgage rates are an appealing way to finance home improvements or remodels. As interest rates have inched down, leading lenders such as Washington Mutual and secondary mortgage bank Fannie Mae report increases in the number of consumers who take equity out of their home during a refinance. Last quarter, Washington Mutual saw about 30 percent of borrowers take cash out of their property when they refinanced, often used for remodeling.

For homeowners whose interest rates or mortgage payments are already low, or for those who have recently refinanced, it may make better sense to consider taking a home equity loan or home equity line of credit.

Home equity loan or second mortgage

Taking a home equity loan, also called a second mortgage or second trust deed, is a good option for borrowers who are not in the market to refinance and are considering a large home improvement project, often including structural changes to the home. This option is beneficial to homeowners who want a longer term to pay off the loan, say 10 to 30 years, versus a shorter-term home equity line of credit.

Homeowners should take a look at how much money they will need to finance their project, decide if they will be making structural changes to the home, and consider how much time they want to pay off the loan, says Vella. "If a homeowner is planning a remodel project, such as a kitchen and bathroom remodel, and wants longer to pay off the cost, they may want to consider a home equity loan over a line of credit," she said.

Home equity line of credit

For consumers planning a home improvement project, such as purchasing new windows or remodeling a kitchen, and want to pay off the loan within a shorter period, a line of credit might be the best option. While a home equity loan covers a major expenditure, a home equity line of credit is designed for small- to medium-sized projects, making cash available when needed. Both home equity loans and home equity lines of credit may offer an attractive blended rate (the combined rate of your original mortgage and equity line) while maintaining tax benefits.

To simplify the process even further, Washington Mutual (WaMu) offers a new product - an On The House equity line card. This allows homeowners to access their credit line by using an On The House Visa card, anywhere Visa is accepted, or by using checks. Borrowers might be able to write off paid interest (check with your tax advisor) and there are low introductory rates available for the first six months.

"WaMu's On The House Visa is perfect for updating your home," said Pam Gavin, first vice president of product development for Washington Mutual's On The House equity line card. "You can also re-use the card as you pay down the credit line, which is great for ongoing projects."

Energy companies promote energy efficiency

Homeowners considering remodels to improve the energy efficiency of their house may want to check with their local utility company to find out if it offers an energy efficient mortgage or other programs designed to encourage energy-efficient home improvements.

For example, Pacific Gas and Electric Company (PG&E) in California promotes two kinds of financing for energy efficient home improvements. PG&E promotes the availability of ENERGY STAR labeled financing, which is administered by third party private lenders, Volt VIEWtech and the Electric & Gas Industries Association. This program is a way for customers to finance money-saving, energy-efficient equipment such as ENERGY STAR gas furnaces, central air conditioners, geothermal heat pumps, ceiling and wall insulation, programmable thermostats, pipe insulation and more. The financing is a combined effort of these lenders, the Department of Energy and the Environmental Protection Agency and is offered to residential customers through contractors approved by these lenders.

PG&E also promotes the use of Energy Efficient Mortgages (EEMs) and the benefits of energy-efficient retrofits at the time of sale of a home. If an official home energy rating (HERS) report indicates that home improvements will save the buyer money, then they may qualify for an EEM. EEMs allow a borrower to finance home improvements that help with making the home more energy efficient.

For more information about refinancing or other mortgage-related issues, contact Washington Mutual at (800) 933-3590 or (888) 926-8536 or visit www.wamuhomeloans.com.

For information about Washington Mutual's Home Equity Loans or On The House Visa card, visit your nearest Washington Mutual financial center or call telephone lending at (800) 933-3590.

For PG&E customers who want more information on the ENERGY STAR labeled financing, call (800) 713-6583 for a free "Go Green" kit. For PG&E customers who want more information on Energy Efficient Mortgages, call (877) 700-7407.

Courtesy of ARA Content, www.ARAcontent.com, e-mail: info@ARAcontent.com