Appliance.com

Financing A Renovation The good news is that you’ve decided to finally renovate that old kitchen. You can’t wait to add that new stainless steel refrigerator and matching dishwasher. Problem is, buying all these new appliances can be awfully expensive. How do you pay for it all if you don’t have tons of money sitting around?

You finance it, that’s all.

The easiest way to do this is by tapping into your home’s equity. Loans that do this are called home-equity loans. This type of loan allows homeowners to borrow a certain amount of money depending upon how much of their original mortgage loan they have already paid off. Such loans are good ways to borrow money because they come with some of the lowest interest rates around. Even better, the interest homeowners pay on such loans are usually tax-deductible. There is a negative, though: Lenders can take possession of consumers’ homes if they fail to repay their home-equity loans.

Homeowners who haven’t done so recently can also choose to go with a cash-out refinancing to pay for major new appliances. Basically, consumers can take their existing mortgage loan and swap it for another at a lower interest rate. Depending again on how much of their original mortgage loans that consumers have already paid off, they will be left at the end of the transaction with additional cash that they can use for any purpose, including purchasing the latest washer/dryer combination.

Senior citizens can also take advantage of what is known as a reverse mortgage loan. To qualify for a reverse mortgage, a person must be at least 60 years old and a homeowner. A reverse mortgage converts the equity in seniors’ homes into cash. Seniors can use the money from a reverse mortgage to pay for anything from daily living expenses and home repairs to medical bills and long-term health care. Seniors continue to hold title to their homes even while the reverse mortgage is outstanding. Seniors can choose how to receive the money from a reverse mortgage. They can either receive it in one lump sum, in fixed monthly payments or in the form of a line of credit. No payments are due on a reverse mortgage while it is outstanding. The loan becomes payable only when a homeowner ceases to occupy a home as a primary residence. This can occur when the homeowner or last remaining spouse passes away, sells the home or permanently moves out.

Homeowners can also choose to take advantage of the financing options all major home-appliance retailers now offer. Retailers such as Home Depot, Sears, Lowe’s, and others all offer their own credit cards, and most offer periodic incentives and specials to encourage consumers to sign up for them. Consumers should ask their local retailers about any specials, as these change frequently.

Some retailers offer extensive credit and financing options. Sears, for instance, offers a basic store credit card but also a version with more bells and whistles, the Premier Program. Consumers taking advantage of the Premier Program can participate in special sales preview days at their local Sears stores. The retailer also offers a special Home Improvement Account available to consumers purchasing from a selected list of products, including built-in home appliances.

The key to finding the best financing option, again, lies in research. Consumers looking for storecredit cards and financing options should visit the Web sites of national retailers, sites that usually include both basic information and sign-up forms for credit. Those considering obtaining financing for major home-improvement projects from local or national banks can find more information from the Web sites of both the Mortgage Bankers Association of America, www.mbaa.org, and the National Association of Mortgage Brokers, www.namb.org. More Editorials