As spring approaches its zenith, and summer rounds the corner, you’re probably starting to worry about how you should manage home improvement. You may be asking yourself, “Do I really need a new kitchen?” “How am I going to finance this project?” Or perhaps most importantly, “Is this going to be a good investment?” Rest easy knowing that you’re not the only one affected by these questions.
A whopping 57 percent of some 1,300 homeowners surveyed in February by LightStream1, a division of SunTrust Bank that focuses on home improvement financing, said they planned to spend money on home improvement projects this year. From this 57 percent, 36 percent said that they planned to spend $5,000 or more, and 18 percent responded that they planned to spend $10,000 or more.
When it comes to financing, most homeowners, about 59 percent, plan to use savings.3 That’s a great way to finance most home improvement projects, but simply isn’t practical for most people when attempting larger projects. In cases such as those, your goal should be to minimize total interest expense over a set time, while still meeting your normal financial goals. Of course this must be considered on a case-by-case basis, but typically your first option should be to ask your lender to increase your home equity line of credit, as you shouldn’t have to pay much in closing costs on the loan.
If for some reason this doesn’t work, whether it be worry that your interest rate will go up, or because your lender will not approve, then pursuing a cash out refinancing or a home equity loan may be agreeable. All large home improvement projects present a certain amount of risk that is only increased when you pursue one of these options, so it is recommended that you speak with your financial officer or lender before beginning any of these processes.
You are probably wondering which home improvement projects are going to be worth the most in terms of addition to resale value. In relation to resale value, wooden decks and attic bedrooms are among the soundest investments you could make. The average cost of adding a wooden deck is $10,000 while resale value amounts to about $8,000 (80 percent return), similarly the average cost of an attic bedroom addition is $50,148 and the resale value is $36,608 (about 73 percent return). 4
No improvement will recoup 100 percent of your investment, but some improvements, more than others, will affect how easy your home is to resell. Some popular improvements, such as major kitchen or bathroom remodeling, have comparatively lower return rates (67 percent and 70 percent respectively) than wooden deck addition and attic room insertion, but are also two of the most important rooms in any house.
Although the average kitchen remodeling costs $56,768 and recoups only $38,485, having a modern kitchen significantly improves your ability to resell your home. Kitchens are often the first part of the house that a potential buyer will see, and if the buyer doesn’t like a kitchen, then they are more likely to be soured to the entire prospect of purchasing the home.
Bathrooms, on the other hand, are trickier as there are likely to be multiple different kinds within your house, and each has different basic rules that you should follow when remodeling. The master bathroom is the most important because potential buyers don’t like the prospect of having to spend a long amount of time modernizing it. The most popular details to include in a master bathroom remodeling are: two sinks, customized showering or bathing facilities, and appealing lighting. Other bathrooms don’t warrant as much concern, but you could consider bumping up a half bath to a full, as many homebuyers are interested in the prospect of having at least 2 full bathrooms.
Another thing to consider when you are remodeling is aesthetics. While it may be tempting to go for a retro look, having a house that reminds you of Grandmother probably won’t be beneficial when it comes time to sell. On the other hand, you should consider how the improvement will look when compared to its surrounding area. When deciding on design decisions, as yourself if it looks like a natural transition from one area to the next.
The most important point (besides financing of course) when remodeling is to have fun with it. Owning a home is one of the largest purchases you are likely to ever make, and design decisions should ultimately be only agreed upon by you and your significant other if appropriate. You probably already had some ideas in mind for remodeling, but hopefully this guide has given you some idea of where to go next, so good luck, and happy designing!
www.prnewswire.com (2015) SunTrust: Homeowners Ready to Spend on Renovations in 2015 Author: SunTrust Banks Inc. Retrieved From: http://www.prnewswire.com/news-releases/suntrust-homeowners-ready-to-spend-on-renovations-in-2015-300051601.html
www.bankrate.com (2012) What's best for financing home improvement? Author: Dr. Don Taylor Retrieved From: http://www.bankrate.com/finance/home-equity/best-financing-home-improvement.aspx
www.thefiscaltimes.com (2015) How to Get the Most for Your Home Improvement Money Author: Marine Cole Retrieved From: http://www.thefiscaltimes.com/2015/04/15/How-Get-Most-Your-Home-Improvement-Money
money.usnews.com (2012) Renovations that Yield the Best Return on Investment Author: Daniel Bortz Retrieved From: http://money.usnews.com/money/personal-finance/articles/2012/10/25/renovations-that-yield-the-best-return-on-investment