How to Pick and Pay for the Best Values in Home Improvement

April 7th, 2015

paying for home improvementsOwning a home is the cornerstone of financial security for many American families. That’s why you need to be strategic about selecting improvement projects that will help maintain and even raise the value of your property over time.

Let’s look at some of the considerations.

Structural improvements are a must
Fresh paint won’t help if your house needs foundation work or a new roof. To protect your investment and the safety of your family, make sure to maintain the structural integrity of your house, as well as the electrical work and plumbing. For big projects, get quotes from multiple contractors, and get repair work done before any problems get bad enough to cause damage to other parts of your home.

Don’t overdo it
Some home improvement projects add value to your home—and some should only be undertaken for your own enjoyment. If you’re planning to sell the house within the next few years, consult with a real estate agent before you give the place a facelift. An agent can advise you about the features buyers are keen on, and steer you away from projects that will make your house too different from the area’s most popular housing stock. New garage doors and siding tend to be winners, but top-of-the-line kitchen and bathroom remodeling jobs usually won’t return enough value.

Be smart about financing
It would be nice to have enough savings to pay for renovations in cash, but that’s not always possible, especially if you get hit with an unexpectedly large repair bill. Home equity is one of the most popular ways to finance major work. Lenders like The First National Bank and Trust offer a variety of these loans. Home equity loans typically have a fixed interest rate and a consistent monthly payment. With a home equity line of credit, or HELOC, rates usually vary according to the market, but you only borrow — and pay interest on — what you need. The interest on both types of loans can be tax deductible, reducing the cost of the debt.

Plan ahead
Even if you never undertake a big renovation, you should still expect to spend 1% to 4% of your home’s value annually on upkeep. Create a budget, and set aside a small amount each month so you’ll be prepared for the next big disaster. Even if you end up financing improvements, it’s still smart to save some or all of the money ahead of time so it will be available for emergency expenses.

When you own a house, spending money on it is inevitable. It’s part of being a good steward. But using your home improvement dollars wisely, and getting the best possible financing, can make your house a better long-term investment and a more comfortable place to live.

Virginia C. McGuire, NerdWallet

Which home upgrade do you think adds the most value? Tell us in the Comment section.