Home is where the heart is. But when it comes to home improvement, you need to use your head, especially if you’re using a HELOC to finance it. Not all improvements make financial sense, so we’re providing you with the best home improvements you can make with a HELOC, or Home Equity Line of Credit.
What’s a HELOC?
Think of a Home Equity Line of Credit as part loan, part credit card. In some ways a HELOC resembles a mortgage, and sometimes it’s referred to as a second mortgage. Feeling confused?
Let’s clarify what a HELOC is beginning with “home equity.” As you pay off the mortgage on your house you build up equity. That equity can qualify you for a line of credit. You can then use that line of credit as needed during the term for which the HELOC is set up.
The line of credit functions similar to a credit card. You use it to pay for home improvements in any amount up to your limit, and you repay the principle and interest by or before your term ends.
You can borrow against the equity of your home for whatever reasons you want, including luxury vacations or education. But it especially makes sense to use your home’s equity to boost its value by making home improvements.
However, you also need to be aware of the risks. Because there isn’t a set monthly payment, you need to have the self-discipline to repay what you borrow against your home. Consider your financial spending habits carefully before financing a home remodeling project with a HELOC.
Three best home improvements you can make
The return on your home improvement will vary depending on geographic region, neighborhood, and the prior condition of your home, but some improvements hold up across the board. Using a HELOC to finance these upgrades can be a smart move.
Everything, including the kitchen sink
A major kitchen remodel might give you the kitchen of your dreams, but don’t expect a high return on your investment. Your personal happiness could evaporate under the debt you incur. The hard truth is that some improvements add more debt than value, putting you further in the red.
But as long as your plans are cosmetic rather than tearing down walls and relocating plumbing, a modest kitchen remodel can give you a great return on your investment. You get a better looking and functioning kitchen while adding to your home’s value.
These are upgrades that make sound financial sense:
- New appliances. If you currently have mismatched appliances that are 20 years old, it’s time to replace them. New appliances are more energy efficient, and if you are putting your house on the market, buyers expect a matching suite of appliances.
- Updated cabinets. If cabinets are falling apart, tear them out. If it’s only the finish that’s outdated, sand and re-stain them or paint them in on-trend colors.
- Countertops. Go with stone if your home and neighborhood support that expense. Go with less pricey and lower-maintenance options otherwise.
From blah to spa
As long as you keep the same footprint, eliminating the need to knock down walls and relocate plumbing, a better bath can add value to your home. Just be wary of going overboard with your remodeling project. Higher end baths can drown you in debt.
Your return on investment for a bathroom makeover will depend in part on the quality of the materials and in part on the quality of the workmanship. Unless you have considerable skill, leave the remodeling to a professional and skip the bathroom as a DIY project.
Focus on these improvements:
- New fixtures. Banish the blue toilet. Pay attention to the sink and vanity with an eye toward storage.
- Make a splash with tile. You can’t go wrong with white subway tile; it’s a classic. In a small bath you can also splurge a little and gain tremendous value for the investment.
The great outdoors
Curb appeal not only adds charm to your home it also adds value to your property. When you consider the best home improvements you can make, don’t overlook the outside of your home. A fabulous exterior sets the stage for what’s inside.
Whether your exterior improvements are from the top down or the bottom up, these upgrades will add value to your property:
- New siding, windows, or roof for the house. If the house needs more than a new coat of paint, replace the siding. Make sure windows are energy efficient.
- Landscaping can quickly pay for itself. Sod, plantings, and the all-important deck for outdoor living space all add to your property value.
To be continued…
This is just a cursory glance at how a HELOC can be used to not only upgrade your home, but increase its value as well. Throughout the fall and into winter we will pick this back up to take a more in-depth look at how you can assess the cost benefits of a HELOC as it pertains to the various aspects of your home that can benefit from it. Stay Tuned.
Check us out
If you’re considering a HELOC to finance your home improvement projects, make United Financial your first call. You’ll like our rates and terms. Before you know it, you’ll be living in your even sweeter home sweet home.