When it comes to your finances, it can seem like all the advice you get is deadly boring, unbearably abstract or both. For example, when it comes to paying off debts, how can you be expected to make a dent without first having a spreadsheet that compares all your credit cards and loans with columns for principal, interest rate, fees and maybe even frequent flyer miles? It’s intense. At the same time, when it comes to spending, you’re no better off. How do you compare the value of a fancy dinner to buying a new outfit for the kids?
If any of those scenarios sound familiar, it might be time to upsize your home. But is expanding right for you?
What about when we don’t have any specific investments in either area? How might it affect us then? Below are some of the people likely to be affected by the economic news of China’s struggles last week. Some it will hurt, some it will help and some we’ll have to wait and see.
But you could also get a great deal on home fixtures and appliances very soon. Chinese factories need the cash, and with their domestic housing bubble bursting, you’re the only one left to buy that amazing new washer/dryer. What if you moved up your remodel to this fall? You could be looking at glorious home goods at ridiculous prices.
Talk to Destinations Credit Union about automobile and personal loans. Get one of the lowest loan rates in the Baltimore area in addition to the cheaper cost of the goods you want to buy. Let’s see if we can help you capitalize on this opportunity.
Saving money is a lot like losing weight. It’s no fun, requires sacrifices and no one at a dinner party wants to hear about your plan. For many first-time home-buyers, trying to save enough money for the down payment on a house can seem like a diet that won’t end. It might even be tempting to click one of those email links that promise magical results, even though you know there’s no magic pill for weight loss and no magic plan for saving money.
When you’re making improvements to your home, you’re not just making your life better in the short term. You’re also making an investment in your future. Ideally, the increase in the value of your home will exceed the cost of the improvement.
However, it seldom works out like that. The most efficient home improvements don’t pay for themselves immediately. The first item on this list has an ROI of 98%. That means you get back 98% of the money you put into it. To look at it another way, you lose 2% of your initial investment.
It takes years for the appreciation in your home to recoup the expense of an improvement. If you’re looking for an investment, putting your money in a share certificate or other long-term investment option will net you more. When you’re making home improvements, though, you’re looking for ways to improve your quality of life while being as thrifty as possible.
Calculating ROI can be difficult because the data is based on national averages. For instance, in drought-afflicted parts of the country, water-efficient fixtures, rainwater collection facilities and low-water landscaping will pay long-term dividends. In places with lots of solar exposure and high utility costs, solar panels will make your home more cost-efficient and attractive to buyers. No one will pay more for a well air-conditioned house in Alaska! Keeping that in mind, finding out what works for your market therefore depends a lot on trends and local conditions.
There is some good news if you’re looking for more universal approaches for getting the best increase in value for your home improvement dollar. There are a few simple rules to follow. Seek relatively low-cost improvements that require little to no maintenance. They should immediately distinguish your house from similar homes and, ideally, they also improve the energy efficiency of your home.
Here are four home remodel projects that can improve the resale value of your home. They’re excellent uses for your home equity line of credit (HELOC) and you may be able to save money by doing part or all of them yourself! By the way, consult your tax advisor to determine if those improvements apply for tax deductions.
1.) Replace the front door
There’s an old adage in real estate that suggests the features get tours, but the front porch gets sales. People make decisions on home-buying all the time by starting with a gut reaction and finding reasons to support it later.
Why not start your home remodeling project with the first thing you interact with on your house: the front door. Upgrading an old, poorly-fitting front door with a newer energy-efficient model is a cheap, quick project that can instantly improve your home’s efficiency and aesthetic appeal. Best of all, hanging a door can be done in an afternoon!
With an average price of just over $1,200, including labor, an energy-efficient front door has an ROI of 98%! It’s also a chance to be creative. A new front door can add a splash of color and window placements can break up a monotonous front profile.
2.) Minor kitchen remodels
Replacing major appliances and installing new flooring is a difficult, time-consuming, and expensive task. Being without a kitchen for weeks on end can be a nightmare and the number of professionals needed to install new lighting and other features is mind-boggling. The national average for spending here is $57,000, and the ROI for major kitchen remodeling isn’t great, at only 68%.
Minor kitchen upgrades, like new cabinets, counter-tops, and energy-efficient cook-tops, are comparatively inexpensive. The average spend here is just under $20,000 with an estimated return on investment at an impressive 80%. Just like with the front door, the changes are mostly aesthetic. People perceive a more modern-looking kitchen as being a better fit than a more “retro” look.
This is also a chance to customize a place where you spend a remarkable amount of time. Having a kitchen laid out just the way you like it can make it easier and more enjoyable to cook. This will encourage you to eat more meals in, and energy-efficient appliances can lower your electric bills for the life of the home.
3.) Wooden decks
Outdoor space is one of the hallmarks of the current iteration of the American dream. Where else can a family sit and enjoy a frosty lemonade on a hot summer day? Watch the kids play in the yard while tending the grill on a beautiful wooden deck!
Wooden deck additions were unpopular for years, as consumers see them as luxuries. During a recession, remodeling dollars tend to focus on needs, like kitchen and bedroom updates. Now that the economy is improving, more people are looking at decks as valuable extensions for their living space.
The average cost, based upon a 16 foot by 20 foot wooden deck, is $10,000. The average return on investment is just over 80%. This is because of the perception of expanded living space at a reasonable price. Adding a deck costs about $35 per square foot, while a square foot of inside space costs an average of $85! Decks are a great way to increase the play space for a modest cost.
Bear in mind that just like the air conditioning in Alaska, a deck in a climate where the climate in inhospitable outdoors for much of the year will not have as much value as one in more temperate climes.
4.) Convert an attic space into a bedroom
For most houses, the attic is an afterthought. It’s a place where unused craft projects and abandoned hobbies go to die. Consider turning that dead space into living space with a remodeling project!
Turning an existing attic space into a spare bedroom or office, complete with its own bathroom, can be done for a slightly steeper price. Nationally, the average cost is just over $50,000. That includes constructing a room, extending utilities to it and adjusting the exterior of the house to accommodate the new space.
This remodel provides a 77% return on investment in resale value, with the potential for more. If you have adult children or relatives visiting from out of town, an attic room can be a wonderful guest room. You could also rent it out for additional income!
Contact Destinations Credit Union if you need help in financing your next home improvement project!
If you are looking for funds to improve your home, using the equity in your home can be a great way to finance the improvements. Using the equity in your home is not something to take lightly, but if you are doing something to improve the value of the home, it can be well worth your while.
What is My Equity?
The available equity in your home is calculated by taking the current market value of the home (as determined by an appraisal) and subtracting the current mortgage balance. Destinations will loan you up to 80% of that amount. To get a rough idea of what your home is worth on the market, you can check internet sources, such as zillow.com, for recent sales of homes in your neighborhood.
Loans Vs. Lines of Credit
A Home Equity Loan is a fixed-rate, fixed-term loan. The payment and the interest rate are constant over the agreed-upon term. Therefore your payment amount will not fluctuate. You cannot borrow against the equity again until the loan is paid off.
A Home Equity Line of Credit (HELOC) is an open-ended loan that you can borrow against any time you need the funds. The line of credit is up to 80% of the equity in your home. The rate on the line of credit is generally lower at the time you apply because it is a variable rate. As market rates rise, so may your interest rate. With a HELOC, you can draw against the line whenever you need the funds.
Both options provide low rate loans to accomplish your goal.
With Destinations Credit Union, our HELOC rates are the Prime Rate minus 1% with a floor of 4%. Since the Prime Rate is now at 3.25% (and has remained so since the end of 2008), our current rate is 4% Annual Percentage Rate. Prime would have to rise to more than 5% before the rate would rise on our HELOC.
If you are interested in exploring a Home Equity Loan or Line of Credit, contact us through our website or give us a call at 410-663-2500.
Many people go to a big bank because they’re easy to find. Those banks spend billions on advertising and building branches on every corner. Becoming a member of a credit union takes a little more work – finding one that you can join takes a little bit of research. But, it’s easier than you think. Most people in the United States are eligible to join a credit union. You can find one through work, or where you live, or through organizations you belong to.
Last year, 2 million people between the ages of 18 and 35 joined a credit union. 28% of credit union members are under 35 while 54% of them are under age 50. The tools of technology are making it easier to see the value that credit unions offer.