Maybe your home is looking a little weathered and worn. Maybe your family is growing and you need an addition to your house. Maybe your home needs upgrades before it can be put on the market. No matter the reason, the first question that must be answered is financial: Is a home renovation right for you and your budget?
Consider the right home makeover idea
Different projects can add different amounts of value to your home. You’ll want to choose popular projects that add value to your home, but you also want to keep in mind that you don’t want to price yourself out of the neighborhood.
Here are some popular renovation projects you may want to consider:
- Upgraded version of different rooms, such as kitchens, bedrooms, etc.
- Replacing old appliances with energy-efficient models.
- Replacing and redesigning windows
- Fixing basic cosmetic and structural issues, such as re-shingling your roof, taking care of any siding issues, etc.
Take caution with renovations, as they can drastically increase the cost your home when trying to get back out of your home what you’ve financially put into it. Even homes that look overpriced or seem like an outlier for the median neighborhood cost can prove more difficult to sell. Renovation projects that involve unusual colors or high-end features may be a turn-off for future buyers. Similarly, a swimming pool may be seen as additional maintenance, so unless you’re sure you want one, consider a different kind of project.
Now that you’ve figured out the project you want, it’s on to figuring out how much it will cost.
How much money can you afford to spend?
Answering his question is no different than answering it when you’re applying for a mortgage. Consider whether any loan you take out for remodeling will still allow you to keep your total monthly housing costs under 28 percent of your gross income, a typical rule of thumb for thumb for home-related, or front-end expenses. These costs include payments on the loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowner’s association dues. Then calculate whether your total debt will remain under 36 percent of your gross income. This total would include housing costs plus any other debts like car payments, credit card bills and monthly living expenses. You can use online mortgage calculators or refinance calculators to help determine your budget’s fitness for a remodeling project.
Other tips:
- You may not have the budget to do all you want to do, so it’s important to keep a realistic perspective for what your remodeling project can achieve within the allowable budget.
- Get pre-approved for a refinanced mortgage, home equity loan or line of credit before you sign any paperwork with contractors or make decisions on project plans.
- Make sure you provide any contractors you interview for the remodeling job a project plan, your goals, and most importantly, your budget. Ask for references. If they’re currently working on a project, ask to visit the site so you can inspect their work and how they do it.
- When choosing a contractor, don’t just pick the lowest price. Make sure the contractor you choose can stay on time and on budget.
Home improvements can increase the value and aesthetic feel of your home, but sometimes it may make more financial sense to relocate. Contact a Mortgage advisor today to learn more about what’s the best option for you.