home improvements

Is Now a Good Time to Take Out a HELOC for Home Improvements?

March 11, 2021 By Tamila McDonald Leave a Comment

With a home equity line of credit (HELOC), you can tap your home’s equity for a variety of reasons, including funding home improvements. Plus, unlike a cash-out mortgage, you can typically tap a HELOC repeatedly. As you repay funds, they can be available for use again, not unlike how a credit card works. Based on the potential benefits, it’s common to wonder if now is a good time to take out a HELOC for home improvements. If that’s on your mind, here’s what you need to know.

HELOC Rates Are Low

Since HELOCs rely on home equity, their rates tend to mimic mortgage interest rates. Due to the Federal Reserve keeping interest rates down and HELOCs being a secured debt, interest rates on HELOCs are near all-time lows.

Additionally, while the Federal Reserve may not intend to move up interest rates in the near future, it will happen eventually. As the economy recovers from the pandemic, interest rates will inevitably rise. When that happens, HELOCs may be less attractive options.

Tax Implications of HELOCs

Using your HELOC for home improvements can actually result in a tax benefit. In some cases, you’ll have the ability to deduct your HELOC interest by making qualifying property improvements, something that adds another layer of value.

When interest rates are lower, this benefit is less dramatic. However, it is nonetheless there, so it’s worth factoring into the equation.

HELOCs, Home Improvements, and Property Value

When you use a HELOC for home improvements, you’re using your home’s equity in a way that may increase the value of your property. This can be a boon, as you may be able to boost the value of a critical asset.

However, it’s important to understand that the cost of certain home improvements doesn’t equal the value increase. For example, a minor, mid-range kitchen remodel may only recoup 77.6 percent of what you spend. For a mid-range bathroom remodel, that figure drops to 64.0 percent.

Now, lower interest rates can make the home improvements worthwhile even if you couldn’t recoup the entire cost in resale value increases. This is especially true if you intend to remain in your home, as the quality-of-life improvements could offset the financial losses.

Deciding If a HELOC Is Right for You

Ultimately, whether now is the right time to take out a HELOC for home improvements depends on your unique financial situation and overall goals. If your income is stable and the updates result in a substantial value increase or enhance your quality of life significantly, it could be worth considering. However, if you have unstable employment, would struggle to repay the amount borrowed, or wouldn’t’ get the value increase you’d hope for, you may be better off passing on this option.

Do you think that now is a good time to take out a HELOC for home improvements? Why or why not? Share your thoughts in the comments below.

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4 Factors to Consider When Doing Home Improvements

January 20, 2018 By Susan Paige Leave a Comment

Doing home improvements can add a great deal of value. You can increase the value of your home, sure, but you can also improve how your home feels, make it a more livable space, and fix problems costing you money in the long run.

Small home improvements can seem pretty simple, but sometimes that small project turns into something much larger as you discover more work that needs to be done. On the other hand, your idea may start small, but you may discover other renovations you want to do that are related or inspired by your project. Top General Contractors Queens can help by giving you ideas for your next home improvement project and point you in the right directions when it comes to picking colors and materials.

Either way, before you embark on huge home improvement projects, there are a few factors you should consider.

Budget

Of course, this sounds basic, but often the thing that disrupts a home improvement project is budget. It is easy to get a distracted and off track and spend more on one area than originally planned. This leaves you with little to no money to complete the other parts of the project.

There are a few ways to prevent this:

Plan Carefully, and Decide What You Will and Won’t Do: Determine what you need and want to do as separate parts of your project, and stick to your list. Need then want.
Get Solid Estimates: Get more than one estimate, and understand what is and is not included in the estimate.
Plan for Extra Expenses: Add between 10 and 20 percent to the project total to cover unexpected expenses.
Avoid Side Projects: Don’t get distracted. Avoid side projects and extra work that could be done at the same time. Stick to both your plan and your budget.

Once you have set your budget, get the money ahead of time. You can get home improvement loans even if you don’t have equity in your home, or you can use a home equity line of credit, savings, or even credit cards. Just be sure to stick closely to what you said you would spend, and keep track of even small expenses.

Time

You will need to set aside time for your home improvement project, and knowing how long it will take for the project to be complete gives you a good idea of when to start it. For instance, you may not want your interior remodel going on during the winter when it is cold outside and your space inside will be limited. Not to mention the snow and mud that might get tracked in when contractors are working.

You may also not want your home torn up for Christmas or other holidays when you have family visiting, or spring break when the kids are out of school. You want to consider what is going on with your life, and how the time when your home is being remodeled or improvements are being done.

While no time may be ideal, depending on how long home improvements will be happening, you will want to schedule around important life events as much as possible. Knowing the timeline is the key to being successful at this.

Lifestyle Interruptions

Before you start home improvement projects, you need to think about how they will interfere with your lifestyle. No matter what, your life will be interrupted in a number of ways.

For instance, if you are renovating and updating your kitchen, you need to plan where and how you will eat until the kitchen is usable again. This means you have to meal plan, move appliances into other rooms, or plan to eat out during that time, which adds expenses into the budget.

If you are remodeling your bathrooms, you need to do one at a time and determine what bathing and other bathroom activities will look like. Laundry rooms are much the same: you still need to use the bathroom, wash clothes, and eat. You will still want to watch television and sit and relax.

Whatever room you are working in, you need to determine how that will affect your lifestyle, and make plans accordingly in the meantime.

Energy

Because of the lifestyle interruptions, the time the project will take, and the money it will cost, home improvements can be exhausting. The process will have an impact on your energy even if you are not actually doing the work yourself.

Stress and lack of energy can have a real impact on your life, so you need to plan accordingly for times when you are less stressed at work and in other areas of your life. You don’t want to plan for home improvements when you have a big project due, or trips or family visits that can require more of your energy as well.

Home improvements are great, but you need to plan properly and take a number of things into consideration when preparing. Your time, energy, and lifestyle will be taxed along with your budget, and keeping those things in mind will help you be successful in your project.

It’s Time to Get Your House Ready for Sale

December 11, 2008 By David G. Mitchell 2 Comments

I was chatting with a neighbor the other day and he mentioned that he is having the entry to his home renovated. I was surprised, since his home is relatively new and, I think, quite nice. He laughed and said that his house does not have “foyer appeal” and that he wants it to be ready for sale when the local real estate market rebounds. Accordingly, he is tearing up perfectly good tile in order to replace it with Travertine.

My neighbor is a real estate salesman. He has lamented that sales have been down for close to two years. Now, he says that sales are non-existent. When I reminded him of the down economy and asked why he would do renovations now, he raised an eyebrow and told me that sales are down for everyone, so good contractors can be hired much more cheaply now, as compared to even a year ago, and they can start their jobs immediately.

For example, last year my neighbor asked for bids on the work that is currently being done at his home. The best price last year was $19,000. This year, the price is $11,000. The house and the project have not changed. Only the calendar has changed, but my neighbor is saving $8,000 because of it. Moreover, my neighbor hired a local contractor who used to be booked up well in advance. In this case, he hired the contractor last Friday and the contractor started work on Monday.

If you have ever worked with a contractor, chances are good that you have experienced delayed starting times for projects and charges that are well beyond your original budget. As you may recall, I am a big fan of do it yourself projects, as I am sure that you are, as well. That said, there are times when I have hired contractors. In the current economy, however, now may be the time to start looking at contractors for big projects that you really cannot do on your own.

If you have a job, and you believe that you are likely to keep it for the next twelve months, now is the time to look at your finances and to assess whether you have any extra funds that you can spend. If you do have the money on hand, look around your house for improvements that you really need to make. Consider how long you intend to live in your home and perhaps ask a realtor to visit your home to give you an estimate of value. The realtor will also tell you what improvements you need to make and, of course, you do not need to be ready to sell your house now. You can then assess whether any of the realtor’s suggestions will improve your quality of life while you are still living in your home.

After you decide on the improvements that you want to make, invite bids from a lot of reputable contractors. Let them know that you are getting more than one bid. Always ask for firm bids in writing. If the contractor that you prefer does not have the low bid, give your preferred contractor the opportunity to match your best bid.

If you are in a stable financial position, you really can look at the down economy as a way to save money on services. If you take advantage of the discounted prices that contractors will offer these days, you can save yourself a lot and you can help to revive our economy at the same time. Consider it your patriotic duty to save money.

How are you approaching home improvements in this economy? Are you considering any major renovations? Will you be hiring any contractors? What projects would you like to complete while prices are low?