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asked Dec 1, 2018 in Home Improvement by Susan

1 Answer

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Hello Susan and thank you for writing. Your credit score should not keep you from getting a home improvement loan because you have so much equity. While some lenders require at least 620 or 640 for a credit score, not all do. You may have to search harder. (Our form allows you to contact multiple lenders at once).

As long as your income is sufficient and your debts are not too high to qualify, you should be fine. Your options include a cash-out refinance, which gets you the lowest interest rate and payment, but comes with higher costs. Your lender may be able to absorb the costs, however, if you are willing to accept a higher interest rate. That rate may still be lower than that of a home equity loan, so you'll want to compare. This loan is probably best if you want a fairly large amount of cash for home repairs.

Your other options are the fixed home equity loan, which has a slightly higher interest rate but lower upfront costs. Its process is very similar to that of the cash-out refinance, and you'll likely pay for a home appraisal and title insurance, which can be expensive. But it comes with a fixed rate and payment, which is nice for budgeting.

Then, there is the HELOC, or home equity line of credit. That's a great option for lower amounts. The costs are low (even zero with some programs), and your starting interest rate may be lower also. However, it is a variable rate and your payments could go up sharply if interest rates rise. It can be difficult to budget with this loan.

Thank you for writing. Please don't hesitate to get back to us with more questions, and good luck with your mortgage.
answered Dec 4, 2018 by GinaPogol (47,650 points)

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