Home Improvement: Financing Your Project and Mechanic's Liens

NORFOLK, VA, Dec 02, 2013—If you're currently looking to remodel your home but aren't sure how to finance it, you're in luck. There are many ways to finance a remodeling project, explains Louis Eisenberg, Associate Broker REALTOR ABR SFR of Prudential Towne Realty. If you have equity in your home, a good credit rating, and steady income, you can refinance your mortgage and borrow a percentage of the equity to cover remodeling costs. “Refinancing is a good option if you can get a mortgage interest rate at least two percentage points below your current home loan rate,” says Eisenberg. Other options include a second mortgage, a home equity loan, or an unsecured loan. Less popular options: margin loans, which are taken against securities you own; and loans from retirement plans, life insurance policies and credit cards. Remember that if you're hiring contractors for work, you need to be able to pay them. “If for any reason you can't, they can take out a mechanic's lien – a “hold” against your property that provides contractors and suppliers legal recourse to assure payment for services,” notes Eisenberg. The liens vary from state to state and allow for a cloud on the title of your property and foreclosure action. Also, if you paid the contractor, but he failed to pay the subcontractors and laborers – who do not have a contract with you – then the workers may file a mechanic's lien on your home. “This could result in a double payment by you for the same job,” explains Eisenberg. “You can protect yourself from unwarranted liens by selecting your contractor carefully and managing your construction project responsibly. “Also, most construction lenders will specify a payment distribution process that involves the securing of lien waivers,” Eisenberg continues. The remodeling contract should address this as well, assuring that the general contractor is responsible for all payments as well as any costs required to remedy lien disputes that may arise. For more information on refinancing, please contact Louis Eisenberg, REALTOR, ABR, SFR, Associate Broker, Prudential Towne Realty, 109 E. Main Street, Norfolk, VA 23510, leisenberg@prudentialtownerealty.com, (757) 572-7244, or www.LouisEisenberg.com