Home renovations can add value to your home while making it a better place to live, and some improvements are more likely to pay off at the time of sale. A recent study by Angi (formerly Angie’s List) shared what he said are the top home features that increase a property’s value, from complex feature updates to expansive home improvement projects.
“Fit out your home with the features of your dreams and you could increase its eventual sale value by more than the cost of the features,” the article states.
The most valuable feature in any home market in the United States was the pot filler, a kitchen sink accessory located above your cooktop that makes it easy to add water while cooking. . Angi estimated that installing this fixture could cost between $600 and $2,000, but pays off with a premium of 3.20%.
Other features coveted by today’s homebuyers that report higher property values include:
- Hanging lighting (2.66%)
- Under cabinet lighting (2.48%)
- His and hers sinks (2.35%)
- Barn doors (2.32%)
- Butcher block (2.26%)
- Quartz countertops (2.26%)
- Oversized windows (2.23%)
- Farmhouse sink (2.22%)
- Subway Tile (2.13%)
REFINANCING FOR HOME REPAIRS AND IMPROVEMENTS: HOW DOES IT WORK?
The most rewarding upgrade also depends on where you live. For example, Angi said homeowners in the New York area have the most to gain from installing a garage (18.47%) — a coveted feature in a market where off-street parking is at a premium. In San Francisco, known for its year-round sunny climate, sellers can add the most value to their homes by adding a pool (11.35%).
While some of these real estate features are relatively inexpensive to purchase and install, others require a large initial investment. For instance, addition of a garage to your home costs an average of $27,500, according to HomeAdvisor by Angi, while build a swimming pool will cost you around $32,000 on average.
Fortunately, there are several ways to finance renovations that allow homeowners to tap into their existing home’s equity or split their upfront costs into fixed monthly installments. Keep reading to learn more about home improvement financing and visit Credible to compare rates on loan products like unsecured home improvement loans and mortgage refinance with drawdown.
THINKING OF REFINANCING YOUR MORTGAGE? HERE IS THE MINIMUM CREDIT SCORE YOU WILL NEED
3 ways to finance home renovations
A recent study found that the average American homeowner can earn nearly $200,000 in value by renovating, but many consumers may be held back by the high initial cost of home renovations. Fortunately, there are several ways to fund home improvement projects, including:
- Mortgage refinancing cashed in
- Home equity loans and HELOCs
- Unsecured Personal Loans
Learn more about each strategy in the sections below.
1. Mortgage refinancing cashed in
Mortgage refinancing involves taking out a new home loan with better terms to pay off your existing mortgage. Cash-out refinancing involves borrowing a mortgage for more than your current home loan, effectively pocketing your home’s equity in cash that you can use to pay for home improvements.
According to a new report, the average homeowner earned more than $55,000 in home equity in 2021, giving some borrowers the opportunity to access more money than ever through cash refinancing.
Keep in mind that mortgage refinancing comes with closing costs, which are usually between 2% and 5% of the total loan amount. Additionally, mortgage rates have risen rapidly in 2022, which means it’s important to seek out the lowest rate possible for your financial situation.
You can visit Credible to compare mortgage refinance rates from multiple lenders at once. This way, you can be assured of getting a competitive rate while financing home renovations.
HOW TO AVOID AN EARLY REDEMPTION PENALTY
2. Home Equity Loans and HELOCs
Another popular home improvement financing option is a home equity loan or home equity line of credit (HELOC). This is a separate loan that is added to your first mortgage and allows you to borrow against the equity in your home.
While home equity loans come with a fixed loan amount and repayment terms, HELOCs allow you to borrow exactly what you need from a revolving line of credit. Both borrowing options are secured loans that use your home as collateral, which means the creditor can seize your property if you don’t repay the loan.
Most home equity lenders and HELOC lenders allow you to borrow up to 85% of the appraised value of your home. Similar to mortgage refinance with drawdown, these types of loans require the borrower to pay closing costs.
You can read more about calculating your home’s equity on Credible.
PERSONAL LOAN SETUP FEES: ARE THEY WORTH THE COST?
3. Unsecured Personal Loans
Unlike other secured loan options for home improvement financing, personal loans are unsecured and do not require you to use your home as collateral. They allow you to borrow a lump sum of cash that you repay at a fixed interest rate in predictable monthly installments over a set repayment period, usually a few years.
Since personal loans are unsecured, lenders determine eligibility and loan terms based on the borrower’s credit history. Applicants with good credit and a low debt-to-income ratio (DTI) will be eligible for the lowest rates available, while those with fair or poor credit may see higher rates – if eligible.
GET A SECOND MORTGAGE? HERE’S WHAT YOU NEED TO KNOW
Another benefit of using a personal home improvement loan is that lenders offer fast financing. The loan amount can be deposited directly into your bank account as soon as the next business day after loan approval. This contrasts with home equity options, which require a longer closing period. Additionally, short-term personal loan rates are currently near historic lows, according to data from Credible.
You can browse the current personal loan interest rates in the table below. And you can visit Credible to get prequalified for free with multiple online lenders at once without affecting your credit score.
VETERANS BORROWING LOANS IS GOING AT A RECORD PACE, STUDY SHOWS
Do you have a financial question, but you don’t know who to contact? Email The Credible Money Expert at [email protected] and your question may be answered by Credible in our Money Expert section.