Home ownership is a huge responsibility that entails a unique set of challenges as well as opportunities. Though there are plenty of advantages in owning a piece of real estate that you may assume will increase in value as time passes, the house won’t take care of itself.
In order to maintain and increase its value — as well as maximize your own enjoyment — you’ll have to perform some home improvement projects on occasion.
The Appeal of Home Improvements
Home improvement projects can range from minor cosmetic upgrades to substantial remodels or additions. Some require nothing more than a trip to the local hardware store and a couple of hours of your time.
Other projects demand qualified professionals and can take months to see through to completion. According to the 2018 Cost vs. Value Report, among the most appealing and high-return projects are:
- A simple garage door replacement. This can cost an average of $3,470, but it may change the entire appearance of the structure and commands a 98 percent ROI at resale.
- A wooden deck addition. This will provide additional outdoor living space and raises the functionality of the backyard. Granted, it’ll cost you a pretty penny ($10,950 on average), but it boasts an average ROI of 82 percent.
- A high-end bathroom remodel. If you do one of these with all the latest designs and fixtures, it could run you close to $20,000, but it’s a room you’ll spend a lot of time in, so you will enjoy the upgrade. The ROI comes in somewhere in the neighborhood of 70 percent.
- Want to add on a master bedroom suite to create more square footage and room for your family? This one will cost you dearly — an average of $123,420 — but you’ll get more than half of that back at resale.
So you can reap immense value from a well-executed and properly budgeted home improvement project. But for many homeowners, the biggest question is: “How are we going to pay for this?”
Six Ways to Fund Your Next Home Improvement
A simple home improvement job like swapping out a bathroom faucet or painting a bedroom is quite inexpensive, of course. But what about the projects that may cost thousands to complete?
If you don’t have the cash to pay for these improvements, you’ll have to explore other methods. Here are a few of your top options:
1. Time and Sweat Equity
According to research gathered by Houzz, 85 percent of people used cash and personal savings to pay for their home improvement projects in 2017. If you have the cash to pay for the materials, perhaps you could employ sweat equity and do the project yourself to avoid paying a contractor for the labor.
You probably won’t want to tackle major electrical, plumbing, or structural work without some experience, but there are lots of other projects you could tackle with a little research and assistance. (YouTube is your friend!)
2. Home Improvement Loans
Are you familiar with Home Improvement Program loans … also known as HIP loans? They’re essentially local government loans that are awarded on an as-needed basis and subsidized through the county.
As home improvement expert Lee Wallender writes, “Counties have a mandate to serve their residents, especially low-income families. On the larger scale, counties are interested in maintaining the value of housing stock. When housing stock declines, overall quality of life declines. Finally, providing these loans drives the economic machine by helping to create projects that create jobs.”
These are not common, but HIP loans typically entail zero interest. This makes them the optimal financing option for cash-strapped homeowners.
3. Home Equity Loan or Line of Credit
A home equity loan is one of the easiest and more flexible options for financing a home improvement project. It enables you to take out a loan against the equity you have in your house.
If you’ve built substantial equity over the years, this could give you the opportunity to borrow a large amount of money at a lower interest rate than you’d get with a personal loan or credit card.
A home equity line of credit is similar. Instead of a fixed amount, though, you get access to a revolving line of credit that replenishes as you pay the balance down.
4. Mortgage Refinance
Do you currently pay interest at a higher rate than the current market rate? Refinancing will not only lower that, but it could also empower you to cash out some of your equity.
Be careful with this option, because it could cost you more in the long-term, but be aware that it’s available.
5. Personal Loan
Personal loans are a good selection for homeowners who don’t want to borrow against their mortgage (or don’t have the ability to do so). You can get personal loans from any number of sources, including banks, credit unions, private investors, and friends or family members.
These usually enjoy a fast approval process, but the interest rates and fees may be high. As with the other options, you’ll want to crunch the numbers and evaluate the pros and cons with care.
6. Credit Cards
When all else fails, you can always put the cost of a home improvement project on one of your credit cards. “Plastic allows you to make purchases if you don’t have the cash up front, and certain credit cards give rewards for every dollar you spend,” NerdWallet explains.
“But you’ll want to make sure you can pay off your balance over a short period of time, because credit cards generally come with higher interest rates than other types of financing.”
If possible, think about applying for a new card that offers attractive introductory options — such as rewards, generous cash back, and possibly zero percent financing.
Green Residential: Houston’s Real Estate Leader
In order to maximize the value of your home and enhance the pleasure you experience through ownership, it’s imperative for you to stay on top of home improvement opportunities (and responsibilities!).
When it comes time to sell, our team at Green Residential will ensure your hard work and diligence don’t go to waste. Contact us today to learn more about our flat fee commission structure, which could save you thousands!