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Imagine transforming your home — upgrading your kitchen or adding that dreamy backyard oasis — without worrying about high-interest rates. Getting a much-needed or much-anticipated home improvement done can be a very satisfying part of homeownership. Still, the costs are often very high — and back of mind when deciding to leap into home upgrades or repairs. For example, you can expect to pay nearly $30,000 to replace the average roof or $17,000 to add on a new wooden deck. Naturally, borrowing money for upgrades and repairs with home project loans is possible, but that, too, is often expensive.
A low-interest home renovation loan can be a great solution if you qualify. In some cases, you may even be eligible for zero-interest home improvement loans. We’ll help you understand how to find these tricky home repair financing options and how they work so you can move on with your project.
What are zero-interest home improvement loans?
A zero-interest home improvement loan is a type of funding that gives you money to complete home renovations and repairs. Unlike most loans, a zero-interest loan won’t charge you any interest at all, as long as you meet the terms of your contract.
Since interest is generally how for-profit lenders make money, most interest-free home improvement loans are instead offered through non-profit organizations, and different state and local government departments. These groups have a mandate to help people in need rather than earn income through interest.
That’s also why most zero-interest home improvement loans are only available to people who meet certain requirements and aren’t as widespread as traditional home remodeling loans.
How do zero-interest home improvement loans work?
If you’re familiar with mortgages, you know that they’re available from a lot of different lenders, yet they’re all quite similar. There may be small variations, but a mortgage from Lender A works basically the same as from Lender B. Zero-interest home improvement loans, on the other hand, work very differently.
Most zero-interest home improvement loans are available through homeowner assistance programs from local non-profit and government groups rather than lenders. Each organization is free to develop its own rules and requirements, which can be very different from place to place. These low-cost loans for home improvement could come with different:
- Term lengths
- Interest rates
- Loan amounts
- Borrower requirements
The last part is particularly important. Most zero-interest home improvement loans are only available to certain people. This type of housing assistance is generally more commonly available to people meeting these requirements:
- Low-income folks
- People with poor credit
- Residents of certain areas
- Homes under a certain value
- Homeowners with equity in their home
- Homeowners who are current on property taxes
Finally, if you do qualify for grants, zero-interest loans, or low-interest home improvement loans in your area, it may come with restrictions. Common restrictions often include things like:
- Work may need to be inspected by a department official
- Work may need to be completed within a certain timeframe
- Funds may only be used for necessary repairs to bring a home back up to code
- You may need to repay any grant funds if you sell the home within a certain time frame
- Improvements for non-necessary things like hot tubs and garden landscaping may not be allowed
There is no national database of low-cost loans for home improvement, so you’ll need to do some work in finding these options, if available, in your local area. These organizations will tell you whether you’re eligible, how to apply, and any program requirements. If you’re having trouble locating resources, try calling 211 or visiting 211.org for personal assistance. Otherwise, here is a good start for where to find home repair assistance like zero-interest home improvement loans:
- Your state housing finance agency
- Local non-profits like Habitat for Humanity
- Your local city and county government
Advantages of zero-interest home improvement loans
The main advantages of a zero-interest home improvement loan are that it’s usually much easier to get for people who may not otherwise qualify for help and very affordable too.
Not having to pay interest saves you a lot of money in the long run. If you took out a $10,000, five-year loan with a 12% interest rate, for example, you’d end up paying about $3,350 in interest alone by the time you paid it off — nearly a third of your entire loan. If you’re able to use a zero-interest home improvement loan, on the other hand, you wouldn’t have to pay that cost.
Check out this loan calculator to understand the true costs of a loan.
Since none of your money will go towards interest, you’ll also likely pay off the debt faster because 100% of your payments will go toward paying down the principal balance.