The Mortgage Slump Hits Home Renovations and Home Equity Loans

Back when the housing market was still booming, many homeowners took advantage of the opportunity to renovate their homes. At the time it certainly seemed to make sense. Interest rates were low; loans were usually easy to obtain and homes were selling like hotcakes. Therefore, many homeowners easily made the connection that it was the ideal time to renovate their homes to include higher-end features. These homeowners reasoned that if they decided to sell their homes they would be able to easily recoup the cost of the home improvement.

In most cases, home-equity loans were used to finance these home improvement projects. A home-equity loan is a special type of loan which allows homeowners to take out a form of second mortgage on their home against the equity they have built up in their homes. Due to the fact that home values were skyrocketing in many areas, homeowners suddenly found themselves awash in rapidly rising equity. That, combined with low interest rates, made it quite easy to borrow thousands of dollars to put toward home renovations. In fact, many homeowners found no trouble at all in borrowing up to $100,000 or even more to fund various home improvement projects.

During this time kitchen renovations and upgrades wee particularly popular. Granite countertops became the standard for the day and all high-end homes and even those that bordered on the fringe of being high-end were suddenly being renovated with granite countertops. High-end appliances, especially those produced by Viking, also became quite popular. Homeowners speculated that adding such high-end features to their homes would raise the value even higher.

In many cases, homeowners were able to recoup at least 80% of the cost of those renovations. In other areas, it was not unheard of for homeowners to recoup almost 100% of the cost of the renovation. Taking into consideration a couple of years of use of the renovations and all together, most of these homeowners found it was quite a good deal.

Today; however, the boom has finally ended and many homeowners are finding that those home improvements are more expensive than they ever dared dream. There is suddenly so much inventory on the market from which buyers can choose; however, that they are no longer as impressed with such features as they once were. As a result, even upscale improvements and additions are now recouping less than 70% of their actual cost. There is no doubt that the return for higher-end renovations has certainly declined quite quickly.

This provides critical advice for homeowners who are thinking of renovating their homes in the current market. This message is that if you are planning to renovate your home, you should not go over the top; especially if you think you will be selling in the next three to four years. In most cases you simply will not be able to get the money back when you sell.

You should also take into consideration the fact that home-equity loans for the purpose of renovating homes are not easy to come by as they once were. Just a few years ago it almost seemed as if lenders were begging to give away money. Interest rates were so low, most homeowners felt as though they were being foolish if they did not borrow money against the equity in their homes. Like the rest of the mortgage industry; however, the default rate for home-equity loans has increased sharply. As a direct result, lenders are being far more cautious today about making home-equity loans.

Real Estate Market Crash provides detailed information on Real Estate Investments, Real Estate Agents, Real Estate Investment Loans, Real Estate Investor and more. Real Estate Investments is affiliated with Lowest Mortgage Rates

Home Equity Loan: Use Your Equity Smartly with a Second Mortgage or Cash Out Mortgage Refinancing
If you are considering using the equity in your home for any reason, either with a second mortgage or cash back refinancing, there are several things ...

Second Mortgage or Equity Loan: They Are Both the Same
In the financial arena, many terms are used to explain what amounts to be the same thing. Mortgages are home loans and equity is the cash value in you...

No Equity Loans - Refinancing Your Mortgage With No Equity
No Equity Home Loans or No Equity HELOCs are second mortgage loans that are offered to consumers, who have no equity in their homes. Having no equity...

How A First Mortgage Differs From A Home Equity Loan
A first mortgage and a home equity loan are two different types of loans. A first mortgage is taken out then the home is initially purchased. A home e...

Mortgage Loan: Home Equity Basics
If you are a homeowner in need of cash for any reason, you might consider borrowing against equity in your home. Equity in your home is an excellent ...

2nd Mortgage or Home Equity Loan
Homeowners often group 2nd mortgages and home equity loans into the same category. While 2nd mortgages are a type of home equity loan, other equity op...

Home Equity and 2nd Mortgage Loan Basics
Using the Internet to find lenders is a fast and easy way to compare home equity loans. You no longer have to visit your bank and sit in front of a l...

Refinance Your Home Equity Mortgage Loan
Home equity loans are perfect for homeowners who need money for home repairs, paying off credit cards, or paying for a child's education. Home equity ...

Rev Up Financially With Lower Equity Home Loan Mortgage Rate
Vroom! Vroom! Nestled in the driver's seat, you feel like you are at home in your favorite recliner. With a firm grip at 10:00 and 2:00 on the steerin...

Second Mortgage Loans - What Are They And How Do They Work
A second mortgage is essentially taking out a loan on your home that uses your homes equity as collateral. If you have been in your home long enough ...

125 Percent Mortgage Loans: Refinancing with a 125 Percent Mortgage Loan
There are a variety of ways to borrow against the equity in your home. Refinancing your current mortgage and taking cash back could save you money ov...

An Introduction To California Mortgage Loans
California mortgage loans are a type of loan given to people residing in the state of California. These mortgage loans are provided for home mortgages...

Second Mortgage Loans: The Junior Lien Expert for Home Equity
People across the nation are searching for alternative financing solutions for home refinancing, because more likely than not they are already locked ...

How To Tell If You Need a Home Equity Loan Or Mortgage Refinance
Everybody has a few problems in their lives. Some of the problems may be purely emotional, but many of them will include financial debacles as well. Y...

Home Equity Loan Interest - Understanding Tax Deductibility for 2nd Mortgage Loans
Home equity loans (second mortgages) and equity lines of credit (HELOCs) are popular ways for homeowners to consolidate debts or to make home improvem...