The most common way to finance a major home improvement project is with a home equity loan, line of credit, or FHA 203(k) loan. The most popular method of financing smallest Cash projects: Withdraw from savings or hop from one interest-free credit card offer to another.
Even with financing, it takes a lot of money to spruce up your home. However, people who do not have access to any of these traditional sources may be eligible for a different type of home remodeling loan that is very affordable. An interest-free home remodeling loan may be available in your community.
This type of loan does not come through the federal government but from the agencies associated with transit, property taxes, licensing, roads, and courts: the local county government. Some counties work directly with lenders to provide these loans. Best of all, some loans are interest free.
- These loans are intended to rehabilitate structures or correct irregularities, not to purchase new property or finance construction.
- Low-income homeowners may qualify for subsidized financing or loans to use for home remodeling or needed repairs.
- Subsidized loans are part of the county’s mission to preserve home values, as well as a way to create projects that create jobs.
- Eligibility is usually determined by income and housing value.
- These types of no-interest or low-interest rehab loans are often available in your county.
What are these programs?
The names vary from county to county, but most often it goes under Home Improvement Program (“HIP”), Home Repair/Improvement Assistance, or a similar name. some examples:
- The Allegheny County Redevelopment Authority in Pennsylvania, for example, has an Allegheny Home Improvement Loan Program.
- King County, Washington provides grants and loans through the Department of Community and Human Services.
- In Hennepin County, Minnesota, residents can apply for up to $30,000 in interest-free home repair loans.
Under these programs, low-income homeowners receive a loan for home improvement purposes, and counties agree to subsidize the loan. Requirements and eligibility vary depending on the government agency that administers the program.
How much money can you save?
Those who qualify will likely find it worth the routine involved in applying because it allows them to fund a home improvement project with significant savings. In one common scenario, the county might subsidize 350 basis points of the interest rate on your loan. Some counties help arrange 0% loans for certain projects, such as promoting energy efficiency in the home.
Let’s run the numbers for a partially subsidized loan. This example of a five-year $20,000 loan compares your costs with and without a 350 basis point interest rate cut.
- Without support: With an interest rate of 4.5%, you’ll pay about $372 per month. The total interest is $2,371.
- With support: With an interest rate of 1%, you’ll pay about $341 per month, for a savings of about $30 per month. The total interest is $512.
By taking out a HIP style loan, you’ll save $1,859 in interest.
Why do provinces do this?
Counties have a mandate to serve their residents, especially low-income families. More broadly, counties are concerned with preserving the value of the housing stock. When the housing stock goes down, the overall quality of life goes down. Finally, making these loans gets the economic machine moving by helping to create projects that create jobs.
How much can you borrow?
The typical borrowing cap is around $25,000 to $50,000. HIP loans are rare to find in the six figures. Some regions offer matching money up to a certain limit.
Eligibility is usually determined by your income and the value of your home. Typical requirements:
- Your annual gross income must be below a certain limit.
- Your home value must be below a certain threshold.
- You should let the program administrator monitor the project.
- All county taxes must be paid in full.
- You can’t use the money to pay off other loans, even if those loans are home related.
- You cannot use the loan money to pay for projects started prior to the time the HIP Loan was approved.
- You must complete the project within a certain period of time, such as one year.
If you’re looking for a home improvement loan with fewer strings attached, there are a few unsecured options that will suit your needs, if you can afford the interest payments.
Things you can’t use money for
You are usually prohibited from financing luxury projects such as swimming pools, satellite dishes, hot tubs, decks, etc. Some provinces place species restrictions of appliances you can buy on loan, with only permanent appliances allowed (oven vs. fridge, for example).
The loans are intended to rehabilitate structures, update any outdated issues, or correct breaches, not to purchase new property or finance construction. Note, however, that some counties have similar programs to help homeowners purchase real estate.
Where to find software
There is no guarantee that your province will receive this program. You may find one under the social services, housing, or community development sections of your local county’s website. If you’re searching within the county, use the words “housing improvement,” “HIP,” or “repair assistance.” In a web browser, you might try searching for “low cost home improvement” + “loan” + your country name.
In addition, the Section 504 Home Repair Program, administered by the USDA, provides up to $40,000 in repair loans and $10,000 in grants (if you’re 62 or older) on a state-by-state basis. .
How do interest free home improvement loans work?
A county or state usually offers a no-interest home improvement loan to help low-income homeowners who live there fix up their homes. These loan programs usually have strict eligibility requirements and dictate how the loan money can be used to increase property value.
How do I get a home improvement loan?
There are many ways to get a home improvement loan. You can use the capital from your home to obtain a home equity line of credit or a home equity loan. You can apply for a low-interest FHA home improvement loan if you meet the criteria for it. If you qualify, you may be able to take advantage of any local county or state home repair loans or grants designed to help low-income families improve their homes.
Can I use a no-interest or low-interest home improvement loan for anything?
If you get a no-interest or low-interest home improvement loan from a county-run program designed to help low-income homeowners, you’re likely to be limited in the scope of your home improvement projects. For example, some programs will not allow you to put in what insurers consider luxury items, such as a swimming pool or hot tub. Most home improvement loan or grant programs are for projects like painting the exterior of your home, fixing broken windows or doors, or anything that needs repair, renovation, or updating.