Remodeling Projects: Which
Ones Build Your Home Equity Most?
Talking About Money With Jim Larranaga
(ARA) - Can't bear another day with pea green countertops?
Does your rust-colored carpet make you cringe? If your home's
interior looks like the set of "Three's Company," or if you're
just ready for a change, now may be the perfect time to
renovate. The right remodeling project can enhance the
livability and value of your home, but which ones will give
you the most bang for your buck?
The Eyes of the Beholder
Although your personal tastes should factor into the
project you choose, you also may also want to take into
account what a possible buyer might like. Don't worry,
mind-reading isn't necessary. According to Remodeling Online's
2000-2001 Cost vs. Value Report, kitchen and bath remodels,
along with second-story, bathroom and family room additions,
recoup most of your costs when a home is sold.
Other improvements you might consider include:
- Energy efficiency - With energy bills going sky-high, a
new furnace that updates your home's energy efficiency can
lower your energy bills, as well as appeal to buyers.
Consider a new heating and cooling system, new windows or
added insulation.
- Landscaping - Shrubs, rock gardens and retaining walls
can enhance the beauty of your home's exterior and increase
curb appeal when it's time to sell. Properly placed trees
can block wind and lower heating costs.
Visiting model homes is another good way to predict what
amenities future buyers might appreciate and find ideas that
you might appreciate. Tour open houses around your
neighborhood, too. Besides getting free cookies, you'll get a
chance to see how your home compares with others that a
potential buyer might visit.
Hammer Time
So you've decided on a project, now where to begin? If your
project is complicated, you will probably want to start by
hiring a contractor. The Better Business Bureau recommends
getting bids from at least two or three contractors using the
same specifications. Ask for local references and try to visit
one of their completed projects. Verify that the contractor
has insurance to cover worker's compensation, property damage
and personal liability in case of accidents. Also, make sure
the contractor is bonded and licensed if your city requires
it.
Financing Your Fix Up
A strong housing market has made it easier to finance home
improvements. Rising home values can mean increased home
equity for people who have owned their homes for several
years. Equity is the difference between what your home is
worth and how much you owe on your mortgage and any other
liens on the home. Home equity loans let you borrow against
that value for a variety of uses, including home improvement
projects.
Home equity loans are available at fixed rates with average
terms up to 15 years. These loans usually have lower interest
rates than credit cards, which may mean lower payments and
more savings for you. Best of all, the interest on home equity
loans may be tax deductible. (Be sure to talk to your tax
advisor.)
A home equity line of credit may be a good option if you
won't be doing all your renovations at one time. With a line
of credit, you are given a credit limit that you can borrow
against as you need it. Rates are usually adjustable with
flexible repayment terms.
Now that interest rates are down, it may be a smart time to
think about remodeling. Home improvements may make your home
more comfortable, energy-efficient and increase its value.