Home improvements are not all equal. Some provide more value for resale than others. However resale value is not the only criteria that should be used to determine the projects to complete. Deciding which home improvement projects make financial sense is not an easy task.
What should be the first consideration for deciding on home improvement projects?
It really should be about why you want to complete the home improvement project. It is because you are getting your house ready to sell and want to add value or is it to make your current home more enjoyable or add livable space.
How important is the time you plan to stay in your home?
It is very important to have a good idea of how long you plan to stay in your current house if your home improvement project doesn’t add significantly to the resale value immediately. Completing a major home improvement project that recoups less than 85% of the cost is probably not a smart decision if you are planning on moving within 3 to 5 years.
What would be good projects to increase the value of your home if you are selling it?
There are several low cost ideas to can be completed if you are looking to make your home more attractive for selling. They include:
- Painting key areas neutral colors
- Small landscaping such as trees or shrubs
If you are want to complete large projects that have the potential to increase the resale value then a couple to consider are:
What are projects that should only be considered if you are planning on staying in the home?
- Kitchen updates would be the first place to spend more money
- Bathroom updates would be a good second choice
- A third important update to consider is a new roof if your roof is 25 years or older
- Basement finishing or other projects that add considerable living space are usually good choices
The following projects don’t usually have the return the other projects have but are key projects if you are staying in your home.
Are there any considerations regarding how to finance major home improvements?
- Pools and hot tubs are the two home improvement projects that are most often cited
- Small increases in square footage like a sunroom typically don’t have the benefit of adding value for resale
There are two possible options for projects over $15,000. One is a home equity loan and a possible second one is a refinance cash out first mortgage loan. Both will be the lowest rate, offer the longest term and provide the smallest payment option.
What are the pitfalls of using credit cards to finance major home improvements?
Using credit cards requires one to be disciplined to pay down the debt in a timely manner. If you don’t, the home improvement will be much more expensive due to higher interest paid.