How To Know When to Borrow Money for Home Improvements

Knowing when it’s the right time to borrow money for home improvement projects can be challenging. Volt Credit Union can help!

PRESENTED BY

Teri Bee is the vice president of lending at Volt Credit Union and has been on the team for more than 16 years. We spoke to Bee about Volt’s home equity loans, how to borrow money for home improvements, what type of improvements qualify and more. 

Biz 417: How can someone know if it is the right time to borrow money for home improvements?
Teri Bee: Most people are ready to get started in the spring and summer months because you’re not hit with the rain as much to slow home improvements. A lot of times, people aim to complete these projects to put their house on the market and transition into a new home before the new school season starts. 

Biz: How does someone borrow money for a home improvement project?
T.B.: First off, we’d get an application and check their credit history, residence, employment and debt-to-income ratio. Once we get pre-approval, we’d let them know what their interest rate and maximum payment would be, and then we’d order an evaluation of the property to make sure the value is there to use as collateral. Next, we would order a title commitment to ensure there are no hidden liens on the property. Once we have all of that information, we can schedule the loan closing. 

Biz: How does your home equity loan work?
T.B.: It is kind of like a credit card, where you have an established credit limit. People can borrow the whole amount to start with, or they can borrow a portion to begin with and come back later and take more and pay it down, or borrow the whole amount again. These types of loans are open for 10 years. If it is not paid off within 10 years, they have an additional 15 years to pay it off if that time is needed. 

Biz: Are there different borrowing options available for financing home improvements?

T.B.: Yes! Besides the home equity line of credit, we are preparing to roll out a home improvement loan tailored for specific projects like fencing, roofing or siding. With this consumer loan, our members get an estimate, and we pay the contractor. Another option is a personal loan, which is an unsecured loan with no collateral. We offer automobile—or any type of collateral—loans, where we use the equity to get customers the cash they need. For example, if someone’s car is valued at $20,000 and they owe $3,000 on it, there’s $17,000 in equity. We can refinance that loan they have currently, pay off the $3,000 they owe and give them the additional $17,000 for home improvements. 

Biz: What type of home improvements are usually considered worthy investments for borrowing money? 
T.B.: The big ones. By that I mean roofing, windows, siding a home, HVAC, new flooring or fencing. Those are a lot of things we will use on the new home improvement loan that we’re going to roll out, but even just remodeling a bathroom or kitchen can cost $30,000 to 40,000 easily. 

Biz: What if someone needs to sell their home after making these improvements?

T.B.: Most home improvements would increase the value of your home, and it’s an investment in you. If you get to the point where you need to downsize, any of the improvements that you’ve done increase the value of your home, so it’s going to come back to you tenfold when you go to sell the home.