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Financing Agencies
and Tips
Looking
to finance the improvements on your home? Here are
some tips to consider.
Potential
Prepayment Penalties
When
deciding among various loan sources, you should
consider prepayment penalties. If you decide to
sell your home while you have a home-improvement
loan, you could be required to pay the loan in
full, including the prepayment penalty.
Option
of Escrow Accounts
Even if
your lender doesn't require an escrow account for
home improvement loans, you may want to consider
using a joint control company to disburse contract
payments. A joint control company is a licensed
escrow company that specializes in handling funds
for construction jobs. However using an escrow
account is not substitute for a payment
bond.
Escrow companies are not required by law to inspect
your job. They usually provide vouchers for the
borrower to complete and present to the escrow
company. A good practice would be to ensure not to
authorize payment to the contractor in advance of
any work.
For
additional protection, escrow companies use an
Addendum to Control Agreement Escrow
Instructions . The addendum should state in
writing that the escrow company agrees to a method
of making payments best deigned to protect your
money and property. This is signed by the escrow
company, you and the contractor. Ask your lending
agency and contractor for recommendations on escrow
companies. If you are considering an escrow
account, it is best to have this stated in writing
on the contract.
Completion
Bonds
If you
want a completion bond, this should be stated on
the contract. For further information on completion
bonds, contact your attorney.
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