When obtaining a home loan, you’ll receive two important documents from your lender: a loan estimate and a closing disclosure. On the surface, these documents are very similar, but they both serve different purposes. Here’s what you need to know about the differences between these two forms and what each means for you:
3 Types of Home Loans in St. Louis for Home Improvement Needs
Did you know that there are different types of home loans in St. Louis that can help cover the cost of renovations and repairs? These loans do exist, however they are not called home improvement loans. Let’s say you are itching to upgrade your kitchen, yet you feel that these expenses would cost you money that you don’t have. Some homeowners don’t realize there are multiple ways to finance these renovation projects. Projects can both add value to your home and protect your investment.
The four popular types of home loans in St. Louis are home equity, home equity line of credit (HELOC), energy efficient mortgage, or cash out refinance.
Home Equity Loan:
Home equity is using the equity of your loan as collateral. The equity of the loan is the amount of your loan that you have “paid off” and therefore “own” in your home. This option is generally referred to as a second mortgage because this loan is taken out in addition to the primary mortgage. This loan comes in a lump payment and is paid off in regular intervals at a fixed rate.
Home Equity Line of Credit (HELOC):
A home equity line of credit (HELOC) is the second option. This option is similar to a home equity loan. However, instead of paying in a lump sum, you get a revolving credit line. You can qualify for a certain amount based on the equity of your home. Many individuals use HELOCs for home improvements, but they can also be used for college tuition and other expenses.
Energy Efficient Mortgage (EEM):
Your third option is the energy efficient mortgage, also known as EEM. This works similar to a second loan that is rolled into your primary one. You can either get an EEM when you first get your mortgage, or add it on during your refinance.
The final home loan option is the cash out or cash back refinance, which is refinancing your home for an outstanding balance on your existing loan. This strategy is often used when the value of your home has increased in value over the years. For example, you may have bought a home for $200,000 and paid off $90,000 of the mortgage over the past 10 years and the home has increased its value up to $400,000. After 10 years you owe $110,000 and decide to refinance for $250,000 which leaves you $140,000 in cash for upgrading your home.
These types of home loans in St. Louis will give you that extra boost to have the funds to fix up your home. If you are interested in learning more about the different home loans in St. Louis that work best for your situation, contact us today to get a free consultation.The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.