A home improvement loan is a specific type of real estate loan which is used for completing home renovation projects. These loans are typically drawn from the same types of companies which issue mortgage loans.
In some instances, mortgage loans may be considered a type of second mortgage. Mortgage loans may also be issued independently by a bank or other type of lending institution.
A home improvement loan is similar to a home equity loan, although an equity loan can be used for a broader range of purposes. A home improvement loan is a monetary loan which allows homeowners to engage in repairs, renovations, and improvements to their properties.
Home improvement loans are different from mortgage loans because they are used for the improvement of a property, including labor and materials, instead of for ownership aspects of the home. A home improvement loan helps an individual to increase the value of their home.
These types of loans often allow homeowners to ensure that their property is safe and in good condition. These loans also allow an owner to sell their property at a profit in the future.
What Are Some Uses for Home Improvement Loans?
There are numerous common uses for home improvement loans, including:
- Repairing broken property structures;
- Upgrading:
- windows;
- doors;
- overhanging eaves; and
- other structures;
- Adding an additional story or an additional room to a home building;
- Adding office spaces for at-home-business use;
- Various home gardening and landscaping projects;
- Lengthening or widening:
- driveways;
- garages; or
- walkways;
- Building an additional guest house or storage shed in the backyard; and
- Overall maintenance and property renovation.
In general, it is up to a homeowner to determine how any additional funds will be utilized. A home improvement loan is typically somewhat easier to obtain than a second or third mortgage.
Home improvement loans typically require that the borrower use the funds only for home improvement purposes and not for another purpose, such as a vacation or recreation.
What are Home Improvement Contracts?
Home improvement contracts are types of agreements which are formed between a homeowner and a home development or construction business. Generally, these types of contracts are used to cover renovations projects around the home, such as:
- Attaching an outdoor deck;
- Building a patio; or
- Addition another floor to a residence.
A home improvement contract is almost always required, regardless of the size of the project. These contracts ensure that the parties are aware of their obligations of their agreement so they can properly execute them.
A home improvement contract is also essential for housing projects because these types of projects are typically required to be completed within a certain time frame and within a strict budget. Examples of home projects which are typically the subject of home improvement contracts include:
- Repairing an old or broken structure within the home, such as a staircase;
- Installing new items in a home, such as:
- blinds;
- windows;
- doors;
- eaves;
- flooring; and
- other improvements;
- Adding a second story to a house;
- Tearing down walls to create a bigger room or larger area, such as taking down a wall that separates a kitchen and a dining room to condense it from two rooms to one large space;
- Renovating a particular room, such as adding a handicap shower or installing a brand new bathroom;
- Changing the layout of a room, such as installing new cabinets in a kitchen or rearranging kitchen appliances like the stove or a counter;
- Making changes to the landscape, such as the garden, driveway, yard, etc.; and
- Building an outdoor structure, including spas or swimming pools.
Most home improvement projects and the parties involved in them will benefit from drafting and signing formal contracts prior to starting work. Home development contracts are commonly used when a homeowner has not worked with a company or business that was hired to do a job.
Additionally, home development contracts can be useful for all parties to the project because they serve as written records of the original intentions of the parties in the event that a dispute over the work arises in the future. Therefore, if an individual is planning to make upgrades to their home, they should consult with a local home improvement contract lawyer.
A lawyer can assist with the drafting or reviewing of home improvement contracts prior to beginning a construction project on a residence.
What Are Some Common Home Improvement Loan Disputes?
Home improvement loans are commonly associated with various legal issues and disputes, including:
- Zoning and land usage;
- Disputes over qualifications;
- Disputes over repayment or defaults on the loan; and
- Loan fraud.
For example, issues may arise when an individual uses a home improvement loan to build another story or a higher structure on their property. If the new structure blocks the neighbor’s access to sunlight or their view, it may be a zoning or land usage issue.
These types of issues may require further legal action to fully resolve the dispute. A dispute may also arise if the borrower does not repay their loan.
Pursuant to the contact terms of home improvement loans, a borrower is required to repay the loan even if their project is not completed. If the home improvement loan is not repaid, it may go into default, similar to any other loan.
Disputes also arise related to home improvement loan approval and eligibility. As previously noted, a home improvement loan is typically easier to obtain than other types of home loans.
However, there are some basic requirements, such as good credit, which are necessary to obtain the loan. A dispute over eligibility requirements may put a home renovation project on hold and may lead to a lawsuit in some cases.
Another common issue is loan fraud, which is similar to mortgage fraud and other types of loan fraud. New homeowners or absentee homeowners, who are homeowners who reside in another country, may become targets for loan fraud.
What is Loan Fraud?
In general, loan fraud occurs when either one party provides false information or gives a misrepresentation in order to obtain a profit on a loan arrangement. In the case of a home improvement loan, fraud may occur on the part of either party.
It is, in fact, quite common for fraud to occur related to home improvement loans because they tend to be smaller loans which are subject to less regulation. The following factors may be at issue related to a home improvement fraud scheme:
- Misrepresentation regarding the loan amount;
- False signatures and false contact information; and
- Using fake credit information to obtain a loan.
In some cases, home improvement loan fraud involves the cooperation of both parties. For example, a lender may knowingly qualify an individual for a loan, even if they do not meet the eligibility requirements.
This type of collusion is illegal and may lead to legal consequences for both parties.
Do I Need a Lawyer for Assistance with a Home Improvement Loan?
It is essential to have the assistance of a mortgage lawyer for any home improvement loan issues, questions, or concerns you may have. Obtaining a home improvement loan may be complex.
Your lawyer can assist you with obtaining, negotiating, or revising your home improvement loan arrangement. In addition, your lawyer can assist you with filing a civil lawsuit for damages, if necessary, and represent you in court.
