Today we’re exploring larger remodeling projects, and the factors that should be considered in making related decisions.
As you get settled in your house and time goes by, you
may eventually wish to make some expensive “optional” changes. Maybe your
family is growing and you need more space. Maybe the bathroom or kitchen needs
updating. Or maybe you want to finish an unfinished basement. The good news is,
many such improvements will add value to your home and thus will offer at least
some potential return on your investment. Here are a few things to consider as
you decide whether the changes are a good idea financially for you, or not:
- Will the project be worth it for you? Do you plan to stay in the house long enough to enjoy the investment? Or on the flip side, would you likely need to move if you did not pursue it as may be the case with a growing family? Also worth considering is whether the current situation is so poor that it would pose a major handicap were you to try and sell the house?
- How will you pay for the project? If you can save toward the project over time, you may be able to pay in cash. This is the best option in most cases. Otherwise, if you’ve lived in the home for a number of years, hopefully the home’s value has increased while you have paid down the balance of your loan. This would leave a certain amount of equity, which you could tap to pay for the project via a home equity loan.
- What projects make sense financially, and what projects don’t? Generally, projects such as room additions, kitchen remodels and finishing unfinished basements add significant value to your home. Don’t expect to recover all of your invested costs, but your home will usually appraise for more once the project is complete. More questionable financial impacts could occur with projects such as eliminating a room to enlarge another, finishing an unfinished garage or installing an in-ground swimming pool in a location with a harsh winter climate.
- How will the project be executed? If you’re comfortable doing it yourself, great! If not, you’ll want to work with a contractor who you trust. Best practice is to have two or three firms bid on your project to make sure you’re getting a good price. Here’s a great guide to this step of the project from our friends at FRAMEWORK®. Don’t forget to obtain any required building permits!
- Have you thought about reconnecting with your Homeownership Advisor? Even if you bought your home without the free assistance of a nonprofit advisor, they’re a great resource to discuss the pros and cons around your potential project. They also can help you navigate any special repair and rehabilitation grants and loans you may qualify for based on your home’s location. To find an advisor near you, click here.
Make no mistake – remodeling projects are disruptive, and
often end up costing a bit more than initially anticipated or estimated. But
once the dust settles, it can be like having a whole new house to enjoy!