The most common way to finance a major home improvement project is with a home equity loan, line of credit, or FHA 203(k) loan. The most popular method of financing smallest Cash projects: Withdraw from savings or hop from one interest-free credit card offer to another.

Even with financing, it takes a lot of money to spruce up your home. However, people who do not have access to any of these traditional sources may be eligible for a different type of home remodeling loan that is very affordable. An interest-free home remodeling loan may be available in your community.

This type of loan does not come through the federal government but from the agencies associated with transit, property taxes, licensing, roads, and courts: the local county government. Some counties work directly with lenders to provide these loans. Best of all, some loans are interest free.

What are these programs?

The names vary from county to county, but most often it goes under Home Improvement Program (“HIP”), Home Repair/Improvement Assistance, or a similar name. some examples:

• The Allegheny County Redevelopment Authority in Pennsylvania, for example, has an Allegheny Home Improvement Loan Program.
• King County, Washington provides grants and loans through the Department of Community and Human Services.
• In Hennepin County, Minnesota, residents can apply for up to $30,000 in interest-free home repair loans.

Under these programs, low-income homeowners receive a loan for home improvement purposes, and counties agree to subsidize the loan. Requirements and eligibility vary depending on the government agency that administers the program.

How much money can you save?

Those who qualify will likely find it worth the routine involved in applying because it allows them to fund a home improvement project with significant savings. In one common scenario, the county might subsidize 350 basis points of the interest rate on your loan. Some counties help arrange 0% loans for certain projects, such as promoting energy efficiency in the home.

Let’s run the numbers for a partially subsidized loan. This example of a five-year $20,000 loan compares your costs with and without a 350 basis point interest rate cut.

• Without support: With an interest rate of 4.5%, you’ll pay about $372 per month. The total interest is $2,371.
• With support: With an interest rate of 1%, you’ll pay about $341 per month, for a savings of about $30 per month. The total interest is $512.

By taking out a HIP style loan, you’ll save $1,859 in interest.

Why do provinces do this?

Counties have a mandate to serve their residents, especially low-income families. More broadly, counties are concerned with preserving the value of the housing stock. When the housing stock goes down, the overall quality of life goes down. Finally, making these loans gets the economic machine moving by helping to create projects that create jobs.

How much can you borrow?

The typical borrowing cap is around $25,000 to $50,000. HIP loans are rare to find in the six figures. Some regions offer matching money up to a certain limit.

requirements

Eligibility is usually determined by your income and the value of your home. Typical requirements:

• Your annual gross income must be below a certain limit.
• Your home value must be below a certain threshold.
• You should let the program administrator monitor the project.
• All county taxes must be paid in full.
• You can’t use the money to pay off other loans, even if those loans are home related.
• You cannot use the loan money to pay for projects started prior to the time the HIP Loan was approved.
• You must complete the project within a certain period of time, such as one year.

Things you can’t use money for

You are usually prohibited from financing luxury projects such as swimming pools, satellite dishes, hot tubs, decks, etc. Some provinces place species restrictions of appliances you can buy on loan, with only permanent appliances allowed (oven vs. fridge, for example).

The loans are intended to rehabilitate structures, update any outdated issues, or correct breaches, not to purchase new property or finance construction. Note, however, that some counties have similar programs to help homeowners purchase real estate.

Where to find software

There is no guarantee that your province will receive this program. You may find one under the social services, housing, or community development sections of your local county’s website. If you’re searching within the county, use the words “housing improvement,” “HIP,” or “repair assistance.” In a web browser, you might try searching for “low cost home improvement” + “loan” + your country name.

In addition, the Section 504 Home Repair Program, administered by the USDA, provides up to $40,000 in repair loans and $10,000 in grants (if you’re 62 or older) on a state-by-state basis. .