Homeowners: Where Will You Find the Money for All Those Spring Projects?

Ask your trusted banker if either of these products work for you.

Local banks and credit unions have some great products to help make that home of yours a special place. I am going to breakdown two affordable primary loan types. Both can be tax deductible, but check with your tax accountant to see how it works for you.

Home equity line

This option has excellent purposes. It's flexible for use in home improvements, debt consolidations (as long as you are diligent and do not run up the credit accounts you just paid off), large purchases, vacations, future needs, children's college expenses, and especially for emergency needs.

Your limit is based on the equity in your home.

It's a variable rate, but it is tied to prime. Check with your bank.

The line comes with a borrowing period usually up to 10 years with an additional 15 to 20 years for payback of any remaining balance at that time.

Borrow as you need, and pay it back quickly or on a minimum payment amount. 

Beware of early an closure fee. You can have a zero balance, just dont close the account. Your bank will have specifics on this.

Traditional home equity loan

Good for one-time purchases like fixed home improvement projects or large ticket items. By fixed home improvement projects, I mean projects with a set budget that will not change.

The rate and term are fixed, and all funds are borrowed up front. You begin paying interest from the start. However, beware of a pre-payment penalty if you pay it off early. Each bank will have specifics on this.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

James Gottemoller March 15, 2012 at 03:00 AM
Great comments and discussions. I will be posting articles weekly. Articles to come, what is online banking and how to ease your banking? /// How does that debit card work? /// Measures to take to avoid the ugly overdraft? Absolutely, I welcome posed to me as the topic of the week.
Jenn Collins March 16, 2012 at 01:32 PM
We installed central air last summer and replaced our boiler in one big project. We were able to use our Home Depot credit card, which had a special 0% interest for 12 months. Over the course of the year we've paid it off, interest-free.
James Gottemoller March 16, 2012 at 03:39 PM
Jenn, The o% interest is a great option. This along with using a credit card is a good option too. It is most effective when it is a medium to small purchase and you are in the position to pay it off quickly. It is only a danger if you have to carry a balance on the card for a length of time and interest charges in the 9-15% range or sometimes even higher. Jenn, thank you for sharing
James Gottemoller March 16, 2012 at 03:41 PM
I think the main reason I like to recommend a home equity line of credit is that it can be a great tool in your arsenal of credit sources. It isnt the only one. But it can be a great access to a larger source of cash quickly.
James Gottemoller March 16, 2012 at 03:47 PM
Several other uses, management tool to have available if you are retiring and want the access to what you built over the years. This next option may have changed over the years, but here it is. Family member going into a nursing home and you dont want to sell the home. My past experience is that it is hard to get the open-ended line of credit from an executor standpoint versus the homeowner signing. If you think this situation is going to arise for you, speak with your family and seek out your trusted banker. Plan your finances dont let finances surprise you....


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