Home improvement loans can take several forms, each ideally suited to different borrowers' lifestyle and financial plans. In any case they can be viewed as a form of investment.

Home improvement loans secured by property generally carry lower rates than unsecured loans. Putting property up as security on the loan will also make it easier to get approval from the lender. Home improvement mortgage loans can take three forms:

• Cash-out Refinance This is a complete refinance of the first mortgage, with the amount needed for home improvement added to the balance and taken out as cash at closing. This is an ideal option when currently available rates and terms are better than the existing mortgage on the home.
•  Fixed Rate Second Mortgage This loan doesn't affect the terms of an existing first mortgage at all, a good choice if the existing mortgage terms are good. A fixed rate second mortgage (aka home equity loan) delivers a lump sum at closing, the payments and rate are fixed, and the term is generally 15 years, amortized over 30 years to keep the payment lower. This is a the superior option when the borrower prefers stability over flexibility and needs a large amount up front.
• Home Equity Line of Credit (HELOC) This loan is the most flexible. Borrowers can tap a pre-approved credit line secured by the home, and only pay interest on what they use. The line can be used, paid, and reused, similar to a credit card. The interest rate is generally adjustable, but some lenders allow borrowers to fix the rate at certain points during the life of the loan. This makes the HELOC an ideal loan for projects that will be carried out in stages over a longer period of time.

Interest rates vary from lender to lender, so comparing rates is vital. Getting the best interest rate in this fashion will lower the overall borrowing cost and thus increase the return on investment represented by the home improvement.