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Milwaukee's community renewal program: Urban renewal techniques
(May 1964)

Appendix A : Financing home improvements,   pp. 43-48


Page 47

which allows the owner 30, 60, or 90 days to repay. Some even encourage "budget accounts" for a 12 month
(or sometimes longer) period. Since this credit is sometimes available at no extra cost, property owners are en -
couraged to investigate this possibility.
Bank Plan. Because of the successful experience with Title I loans, more banks have originated their
own plans. Some banks will charge exactly the same amount as under Title I while others charge considerably
more. The chief advantage of this type of loan is that the bank will often permit borrowing for improvements
that do not qualify for Title I loans. The owner can also add refinements to a new house under these plans; this
is not permitted with FHA Title I which requires that a house be occupied for at least six months before the FHA
will issue the loan.
Refinanced Mortgage. Because title examination, appraisal fees, legal costs, etc. are involved, re-
financing is advisable only when an owner considers a sizable improvement costing, for example, $1,500 or
more. Today one will probably have to pay a higher rate of interest than he did previously, not only on the new
money borrowed, but also on the existing balance refinanced from the old mortgage, which can amount to a
considerable sum.
Second Mortgage. There is also the possibility of obtaining a second mortgage from an individual. This
is not a good way to get home improvement money. Since the holder of a second mortgage cannot enforce col-
lection against the home owner unless the first one is paid, he is likely to charge the owner an excessive rate
of interest or impose difficult terms in the mortgage. He may even welcome the idea of the owner's defaulting so
that he can buy the property at a foreclosure sale. However, at some times and under some conditions it may be
advisable to take a second mortgage.
Personal Loan. This type of loan is usually obtained from a finance company. It not only enables one to
get money for improvements, but also permits him to consolidate existing debts all into one monthly payment.
True interest rates, however, run from 18 to 36 per cent. This loan should be considered as a last resort to be
obtained only after all other possibilities have been exhausted.
Insurance Secured Loan. Relatively few people stop to consider the possibility of an insurance secured
loan from which to obtain money for property improvements. Yet this is an excellent method and one of the
least expensive. All the property owner needs to do is take his life insurance policies to the bank where he can
assign the policies to the band for the full amount of the cash or loan value of the policies. The owner then
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