Financing

If you’re planning to install a swimming pool as soon as you close out the mortgage on your house, wait no longer. You many have more trouble getting a loan for the pool once you own your house outright than you would while still making payments. That’s right: If you can afford it, you might not be able to get financing.

The problem is that unless you have collateral to offer, the loan must be secured by a lien on your house and land. If there are no other liens on the property, the new mortgage would obviously be the first. Under state law, the holder of the first lien may charge no more than 10 percent interest annually. And since Dallas lenders find a ready market for home improvement loans at 12 percent, they aren’t going to be anxious to lend at 10. You may need to be in debt to get credit, in other words.

If you’re among the fortunate many who are still paying for their houses, there are several types of home improvement loans available to you. You can, of course, obtain a loan directly from the bank or savings and loan association. Such loans can be written for up to $15, 000, with up to ten years to pay; they are secured by mechanic’s liens (mortgages on building and land). Interest rates generally fall between 11 1/2 and 13 percent per year. It’s worthwhile to shop around: The total interest paid on a $10, 000 loan over ten years at 11 1/2 percent annually is $6830; at 12 percent, $7170- half a percentage point is worth $340. enough to buy a nice diving board. Harold Williamson, vice-president of Lakewood Bank and Trust, points out that in the long run you might get the best deal by picking a bank and staying with it, since lenders often lower their rates for regular customers.

Your home improvement contractor may offer to take your plans to a bank and arrange for a loan. This indirect loan is exactly the same as the direct loan discussed above, except that you don’t have to deal with the lender in person until the time comes to sign the note. The contractor’s service as a broker may be right for you if you feel unsure about discussing your finances with a loan officer. But expect to pay for the service, either directly to the contractor or indirectly in the form of a higher interest rate than you might have obtained on your own.

The federal government aids homeowners through the FHA Title 1 program, which insures lenders for up to 90 percent of the amount lent. Title I loans may be used for most improvements to the house, but not for luxury items such as swimming pools, greenhouses, and landscaping. The ceiling is $15, 000, with up to 12 years to pay. Though lenders may legally charge less than 12 percent, those in Dallas seldom do. No lien is required on a Title I loan, but many lenders take the additional precaution.

Federal truth-in-lending laws require that loan contracts clearly state the total interest to be paid, the number of payments to completion, and the amount of each payment, so it’s easy to assess the cost of the loan. An important point to check before signing is the provision for prepayment or refinancing. You might find yourself in a position to pay off the loan more quickly than specified in the contract: in that case, you’ll want to be able to reduce the total interest paid.

Home improvement flimflams are not practiced only by lightning rod salesmen in zoot suits. The files at the Dallas Department of Consumer Affairs contain numerous reports of shoddy work, underestimates, and failures to fulfill contracts. Perhaps the most egregious swindle was perpetrated by a roof repairman who gave a 78-year-old widow an estimate of $37. 50, then submitted a bill for $ 1837. He further widened his profit margin by using cheap asbestos siding instead of slate tiles as specified in the contract, apparently assuming that his client wouldn’t be climbing a ladder to inspect the work.

To prevent such sharp practices, the city council passed the Home Repair Ordinance in 1975. This law requires all home repair contractors to be licensed, and specifies a standard home improvement contract.

Upon completion of work costing less than $500, the contractor gives you a written invoice including his name and address, a description of the work done and materials used, and the price. If the repairs to be done will cost more than $500. you must receive a written contract before work begins. The contract must specify the approximate beginning and ending dates for the work, a description of the work and materials, and a complete list of costs, including materials, labor, taxes, and permit fees.

Before signing a home repair contract you should call the Department of Consumer Affairs (630-1111, extension 421) to find out if the company is licensed and if it has been complained against or sued.

How to find a reliable contractor? You might ask your bank or savings and loan officer, or call the National Home Improvement Council (235-8402). This industry self-policing group has successfully enforced high standards of workmanship in other cities, even completing jobs abandoned by member contractors. The Council is new to Dallas, however, so there are many good contractors not yet listed with it.