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Specialty Loan Types
Home Improvement Loans
A home improvement loan is a loan the purpose of which is to provide funds to the borrower for the purpose making improvements to an existing dwelling or building on the property securing the loan. The improvements can be work done to remodel or renovate a property or finance an “addition” to the existing house or some other improvement such as installation of swimming pool or room addition.
If the legal requirements for establishing a contractor’s lien (“mechanic’s lien”) are satisfied the funds from a home improvement loan will not be subject to the 80% loan to value limitation that would exist on a home equity loan (to provide funds for improvements) secured by a primary residence in Texas. The maximum loan amount (when combined with all existing loan balances secured by the property) on a home improvement loan secured by a primary residence can be as high as 95% of the appraised value of the property.
A home improvement loan can be loan secured in a subordinate (“second”) lien position in addition to an existing mortgage or it can replace an existing loan in a primary (“first”) and additionally provide funds for the improvements. A home improvement in a primary lien position will have a more favorable interest rate than one in a subordinate position.