Thinking of improving your home? Ask yourself these questions to see if it’s the right decision.
Maybe you are tired of staring at your outdated kitchen, in its retro lime green appliance and linoleum tile glory. Or maybe you are ready to turn your unfinished basement into a playroom and sitting area for your kids.
No matter the details, renovating your home is a big decision because of the cost involved. Before going ahead, you need to make sure it’s a smart move.
Do you need to renovate?
The question of whether it is profitable to renovate comes down to two key questions:
- Will it improve the value of your home?
- Will it improve your quality of life?
For the first question, a good bet is to talk to a local real estate agent, who may be able to tell you which renovations offer a better return on your investment than others. Or, you can check out this home improvement guide.
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Improving your home will often help you get by some extra money when it comes time to sell your home. You may not get back all of your investment, but you can get a lot of it back.
For example, if you redo your kitchen and spend $ 40,000 in the process, you can only get $ 35,000 back in the form of a higher asking price when you sell your house down the line. But you don’t necessarily need a 100% ROI – many home upgrades won’t give you that, but they do. will allow you to better enjoy your home while you live in it.
And that leads to the second question. High-end countertops in your bathroom may be more pleasing to the eye than your current countertops, but if that bathroom is barely in use, an update may not be worth the effort. On the other hand, turning an unfinished basement into a usable living space could improve your quality of life on an ongoing basis.
How to finance home renovation
Many people cannot afford major renovations outright. If you don’t have enough money in savings to cover your home improvements, you may want to consider these options.
Borrow against your house
Whether it’s a home equity loan or a home equity line of credit (HELOC), you can borrow against your equity (the part of your home that you outright own) and pay that back over the course of the year. time. You will generally pay less interest with a home loan or HELOC than with a personal loan, so this can be a good option.
Refinance in cash
With regular mortgage refinancing, you swap your existing home loan for a new one and borrow the amount that is left on your original mortgage. But with cash-out refinancing, you borrow After than your current mortgage balance. You can use this extra money to finance your renovations. Mortgage refinance rates are quite competitive right now, so if you go this route, you may get a lower rate than what you’ll be charged to borrow through a home loan or HELOC.
Improving your home could make it a better place to live. It can also increase the value of your home. If you are going to renovate, choose your projects carefully and think about how you are going to finance them so that you don’t end up paying an excessive amount of interest in the process.