How to Plan and Finance Home Improvements
Your home is likely to be the biggest single investment you’ll make in your lifetime. If you want to preserve its value over time, that means doing regular maintenance.
Know what to expect
Plan for regular upkeep, and you should also expect periodically to do larger home improvement projects like replacing the roof.
Keep a budget
Predicting maintenance costs is tricky, but some experts suggest setting an annual budget of 1% to 4% of your home’s value for these expenses. Some homeowners divide that number by 12 to figure out how much they need to save each month to prepare for big maintenance bills when they crop up.
Do it yourself
Learning to do basic tasks such as landscaping, painting or fixing a toilet can save a lot of money over time. Some hardware stores and home improvement centers offer classes to boost your skills.
Although you may be able to pay out of pocket for minor things such as gutter cleaning, perennials for the garden or a new kitchen faucet, you might not have the cash on hand for more costly repairs. It’s only a matter of time before you get hit with something big, such as replacing the furnace, digging a new sewer line or repaving the driveway. If you want to finance repairs or improvements using equity you’ve built up in your home, you might want to consider a Home Equity Line of Credit
What is a Home Equity Line of Credit
Widely known as a HELOC, this provides a certain amount of credit secured by your home. Borrowers can withdraw funds when needed and pay interest only on the amount used. These are good for ongoing projects with unpredictable costs.
What is a good use for a HELOC?
Making Home Improvements
Most people who take out a HELOC do so to make home improvements. Experts say you should do this especially if the improvements you’re considering will increase your home’s value. This way, the money you’re borrowing will be returned when you sell your house at a higher price. These improvements can range from a few hundred to tens of thousands of dollars, but they don’t change the footprint of your home and tend to be what future buyers look for.
The National Association of Realtors’ 2015 Remodeling Impact Report lists the following changes as some of the ones with the best return on investment:
Siding: The first impression is everything, and often, siding is the first thing people notice about your house. It is also an important insulation element of your home, and having updated siding can make a significant impact in lowering your energy bill. When picking new siding, keep in mind there are many different options such as vinyl, aluminum, wood and cement fiber.
Kitchen Remodel: A kitchen remodel can return as much as 120% on your investment, according to experts. Not only is it a smart investment for resale value, but it is also a smart social investment because of the amount of time families spend in the kitchen together. The kitchen is considered a great selling point for prospective buyers.
Deck Addition: Nothing says relaxation like a beautiful deck. It’s great for lying out and taking in some rays or for entertaining friends with a cookout. According to home improvement experts, a deck addition or remodel can deliver as much as a 90% return on investment.
Window Replacement: The summer months will be here before you know it, which means you’ll need to beat the heat. But how do you beat the heat without breaking the bank? Look no further than energy-efficient windows. Think about updating your windows with the double-pane variety. You could save up to $500 per year in heating and cooling costs with the right window selection.
Some other uses for a Home Equity Line of Credit:
Supplementing an Emergency Fund
Everyone should have an emergency fund to cover events such as unexpected car repairs and appliance breakdowns. Most people keep these in savings accounts, but you might consider a home equity line of credit as another source of cash. You only pay interest on the amount you borrow, and you could pay the loan off quickly to save money.
Paying off high-interest debt
Because the average interest rate on a HELOC is much lower than the average credit card interest rate, many people think about using a HELOC to pay off their credit cards. This is a great strategy if you’re committed to never carrying a balance again. Otherwise, you’re just adding another debt at a lower rate.
Regardless of how you use a HELOC, remember that the interest rate is variable and may change each time you tap it. On the upside, the interest you pay on a HELOC is tax deductible, like your mortgage interest. If you use a HELOC for the right reason, that’s just one more benefit.
Interested in a HELOC loan for your spring fix-up projects? For a limited time, borrowers get a $50 Home Depot gift card for every $10,000 drawn!*
* To be eligible for this offer, applicants must draw a minimum of $10,000.00 between April 1, 2017 and May 31, 2017 and balance must be carried for at least 30 days. Gift card(s) will be awarded within 30 days of qualifying transaction. Receive a $50 gift card for every $10,000 drawn on a Home Equity Line of Credit ONLY. If a Home Depot card is not wanted, a general Visa gift card can be requested instead. Check with the loan department for additional terms and current loan rates. This is not a firm offer of credit. Home Equity Line of Credit payment example: on a $10,000 advance is $180. Minimum payment is $18 per $1000 advanced. Promotional offer is subject to change or termination without prior notice and is no way sponsored or endorsed by Home Depot stores.
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