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The home remodeling market has grown more than 50 percent since the recession ended as U.S. homeowners are again spending large amounts of money on home remodels.
Almost as popular are home renovations or cosmetic changes that can enhance the look of a property.
Though home remodels are more expensive than renovation projects, they both come at a cost which may not be easy to fund. Still, both can provide an increase in home value if you choose the right project and the most affordable finance option.
Renovations that increase your home value
Rising home prices mean growing equity, offering owners both the incentive and the means to undertake more and larger projects.
But which plans are most likely to provide an increase in home value?
Garage door replacement
Not all renovations are sexy. Some projects need to be done because something is outdated or no longer works.
Installing a replacement garage door can increase your home’s curb appeal and overall value while helping you save money on heating and cooling costs.
In the event you need to replace your garage door, you could be looking at nearly 104% of your investment costs recouped (according to a Remodeling 2018 Cost vs. Value Report).
Finishing a basement
If you really want to add space or value to your home, and you have an unfinished basement, this is a project worth considering. According to Remodeling Magazine, the average basement remodel has a 70% payback.
Keep in mind, it can be costly since you’re likely looking at framing, electricity, plumbing, flooring, drywall, etc. Let’s not forget the cost of labor.
According to Improvenet.com, basement project costs can reach as high as $40,000. That doesn’t include the cost of permits, which range from $100 to $3,000.
Kitchen renovations and remodels
According to the National Association of Realtors (NAR) and the National Association of the Remodeling Industry (NARI), 54% of Realtors suggest sellers complete a kitchen upgrade before attempting to sell; And 23% said a kitchen project actually has helped close a sale in recent years.
Their report states that kitchen updates and renovations are the most appealing interior home project. It can offer better functionality and livability while also offering around 57% of value recovered.
Affordable remodeling options that cost under $4,000
If a renovation seems out of reach, you may want to consider a minor redesign or restructure.
Money magazine reports that some popular home improvements can cost you less than $4,000
- Replacing a home’s plumbing fixtures costs an average of $1,360
- Replacing doors or windows costs an average of $3,422
- Minor bathroom remodels can cost an average of $3,435
- New floors or ceilings average a cost of $3,283
Financing your projects
If your current mortgage rate is higher than or close to current market rates, you may want to consider a mortgage refinance. Lenders will generally let you borrow enough to pay off your existing mortgage and take out more cash, usually up to 80% of your home’s value.
You’re able to get a fixed rate, a fixed term, and low monthly payments compared to alternatives like a home equity line of credit (HELOC), a high-APR credit card, or a personal loan.
Plus, the interest on your mortgage is often tax-deductible* whereas the interest on your credit card is not.
*Be sure to consult with your tax advisor.
Compare fees not just rates
When shopping finance options, don’t be too fixated on interest rates. You’ll also need to factor in upfront fees, prepayment fees, and late payment fees.
HELOCs and personal loans can come with high origination fees. Some mortgage lenders even charge up to $500 to pre-qualify for a mortgage refinance. That’s not the case at American Financing. If you’re leaning toward a mortgage refinance to fund your home renovation project, be sure to check out their customizable loan programs.
Be sure to thoroughly research your desired home projects to see if the benefits will outweigh the costs. When in doubt, talk to a local appraiser or realtor to see if your desired renovations will make your home easier to sell at a higher price.
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