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Town
Happenings of Note
Financing Smart Home Improvements
By
Michael A. Piekarz
Staff Writer
Simple
home improvements are usually within the financial capacity of most
senior home owners, but “big-ticket” items usually require
some sort of financial assistance. When borrowing money for home
improvements, it’s as important to choose the proper source
and type of loan as it is to choose the best contractor to perform
the work.
Homeowners should shop for the best possible loan. Unscrupulous lenders sometimes
persuade older homeowners to borrow money through loans packed with high interest
costs, excessive fees, costly credit insurance, pre-payment penalties and balloon
payments.
Potential pitfalls don’t end with less-than-honest lenders. Some contractors
push financial arrangements that seem to place less importance on the remodeling
work itself. Smart consumers take steps to protect themselves against companies
more interested in making money than in serving their client’s needs.
While improvements can increase a home’s value and adapt it to the owner’s
changing needs, there are many financial risks when a home is used as security
for a loan. Regardless of the end result of the work, even if it is left uncompleted,
the loan itself still needs to be repaid. Homeowners must also take care not
to overextend themselves with unaffordable monthly payments.
The first step is to determine what improvements are wanted, how much can be
spent on these improvements and how to obtain the financing. If done properly,
this extra caution will ensure the desired improvements make financial sense.
When exploring avenues of financing, getting independent, reliable advice is
critical. Senior-friendly sources of information include the Area 4 Agency on
Aging (A4AA), AARP, the California Secretary of States office and the Better
Business Bureau. Any or all should be contacted for assistance. Contacting a
legal aid society or an attorney familiar with elder law may also be warranted.
Contractor-offered financing should be viewed with caution. Some contractors
get large commissions for loan referrals, and unscrupulous mortgage brokers and
home improvement contractors often team up together to take advantage of senior
homeowners.
Several lenders should be contacted to compare all the costs of borrowing. Promises
of low monthly payments may not show the total costs of borrowing money. Most
owners get several competitive bids before hiring a contractor to do the work.
The same practice should be used when shopping for a lender.
Before making any final agreements, the contractor and the lender should be checked
out through the Better Business Bureau and the appropriate licensing agency.
Always have a written, detailed contract for the work and any loan.
All spaces on any construction contract or loan agreement should be filled in.
Full payment should withheld until the work is satisfactorily completed. If a
down payment is required, the first payment should not be more than one-third
of the total cost.
Seniors age 62 or older may want to consider a reverse mortgage as an alternative
to a home loan or other types of credit.
If there are concerns about work done by a contractor or the terms of a loan,
it is important to talk to an attorney as soon as possible. Depending on the
agreements with the contractor and lender, a variety of legal protections may
apply.
While most contractors and lenders are legitimate, savvy seniors should always
take the necessary steps to protect themselves in their financial dealings. Extra
precautionary steps at all stages can keep your home improvement from becoming
a financial loss.
This page and its contents ©2008
Metropolitan News Company, Inc.
