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Should you start moving forward with home improvement plans?
Not everyone who buys a home ends up with a perfect property from the start. You may end up buying a home whose kitchen is outdated, or whose basement is unfinished.
Renovating your home is a good way to get better use out of it. In some cases, the improvements you make could lead to a higher sale price when you decide you’re ready to move on from your home. If these three signs apply to you, it may be a good time to move forward with renovation plans.
1. You have no plans to move
You might easily spend $15,000 to update your kitchen or $20,000 to turn an unfinished basement into usable space with a built-in bathroom. If you plan to stay in your home for a number of years, those outlays may be more than justifiable, as they’ll make your home more comfortable and pleasant to live in. But if you think you might move within a couple of years, then you may not want to invest in renovations you won’t get to enjoy for long.
2. You have a lot of home equity
Home values have soared on a national level, and now, a lot of property owners are sitting on a fair amount of home equity. Equity is the portion of your home you own outright, and it’s calculated by subtracting your mortgage balance from your property’s market value. Home equity is something you can borrow against, so if you’re thinking about making improvements to your living space, you may have an affordable means of financing it.
There are different ways to borrow against your home. You could take out a home equity loan, which is a preset amount you borrow and pay back in regular installments. Or, you could take out a home equity line of credit (HELOC), which is a credit line you draw from as needed.
With a HELOC, you get a little more flexibility, which can be helpful when you’re borrowing money to finance renovations. That way, if your costs come in higher than expected, you may have the option to borrow more.
3. You’re renovating for the right reasons
Some homeowners are motivated to renovate their properties because they think doing so will help them fetch a higher price when they go to sell their homes. But actually, there are few home renovations that offer a 100% return on investment.
Sure, you might get the bulk of your investment back on any given project, but you shouldn’t expect to get all of it. If you’re going to renovate, you should really do so at least partially for your own benefit.
Say you’re looking at spending $15,000 on a kitchen remodel. If you sell your home in a year or two, you might add $10,000 in resale value by virtue of that renovation. If you happen to want an updated kitchen and will enjoy using one, then renovating makes sense. But if you rarely cook and don’t care what your kitchen looks like, then you may not want to make that investment. Instead, you may be better off leaving your kitchen alone and getting $10,000 less for your home when you sell it.
Renovating your home could end up bringing you lots of joy as a homeowner. Just make sure you can check off the right boxes before starting your next project.