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RENOVATING YOUR HOUSE
When you are considering a remodel or renovation of your home then you must weigh the options. What will it cost ? How will you pay for it? How much will the remodel improve the property? What is the property value before you begin the remodel? What will the property value be after the renovation/remodel is completed? These are good questions to ask and know, in most situations
you don’t want to use your equity to remodel and then find the property is not worth any more than before, doing this you have just realized your equity position is gone. Before the project begins you must consider where the money is coming from, most people don’t have money just laying around so a new mortgage or another mortgage as a 2nd mortgage may be considered.
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Time considerations and motivation factors are important for a home remodel or renovation. Here is an outline that explains the primary factors that need due consideration.
Cost of the Remodel
Estimate Expenses: When getting estimates for a remodel, always inspect materials, labor, and even unforeseen costs. It’s wise to get several estimates so all bases are covered.
Budgeting: Allow room for variability in your budget. A buffer of ten to twenty percent is safe, just in case.
Funding the Remodel
Home Equity is a great instrument for financing renovations; however, keep your property manageable.
Mortgage Options: There is a scope here to consider the following options:
Cash-Out Refinance: This enables you to decorate your home by upgrading some areas or adding new rooms with cash you get after refinancing your current mortgage with an additional lump sum.
A Home Equity Line of Credit (HELOC) is a great revolving line of credit that can be drawn whenever you want, based on the equity you own in your home.
Personal Loans: These have the slight disadvantage of having high interest owing to the need to be secured, but they can also fund projects of several types.
Impact on Property Value
Pre-Renovation Value: Understand the present market for your home. Always get a second opinion from an expert, such as an estate agent, regarding a comparative market analysis.
Post-Renovation Value: Find comparable houses in your neighborhood to estimate the value of your renovations. Consider remodeling the kitchen and bathroom, which adds the most value.
Return on Investment (ROI)
Evaluate Improvements: Not every improvement will necessarily significantly increase your home’s value. Be very selective about those that are attractive to buyers and likely to have a good ROI.
Market Trends: Identify your area’s market trends and which renovations are needed.
Timing and Market Conditions
Market Evaluation: Look at how the current real estate market is performing. In a seller’s market, some renovations might be of greater value. In a buyer’s market, some renovation costs will not be covered.
Timing: Consider the current market conditions and your circumstances when remodeling. Some homeowners prefer to build until the market improves or reasonably calms down.
Consult Professionals
Home Appraisers: Given how much worth the renovations could add, it is good practice to see an appraiser before renovating to understand this value.
Contractors and Designers: Find great contractors who can give you insight into the payment of renovations and how it would influence the property’s valuation.
Final remarks
Before renovating a home, consider the expenses, financing resources, possible appreciation of the property, and the condition of the market. Furthermore, equity should be invested wisely to ensure that the improvements undertaken are market-sensible. If you have further questions or want additional help, please contact us!