Thursday, October 11, 2007

Big Returns on Home Improvement

A lot of people are having a hard time selling their homes these days – maybe you’ve heard? Because of that we’re doing many loans right now for people who’ve decided to just remodel, instead of move, until things look up out there for sellers.

(A quick warning – if you need a second mortgage to finance your remodel, in most cases you’ll have to wait for six months after your house is taken off the market.)

This can be a solid investment, if you do it right. Some projects increase your home’s value more than others. Remodeling the most-used rooms in your home is likely to pay off the most.

Kitchens, which are used for preparing family meals and are often the preferred gathering spot for socializing, suffer the most wear and tear. They also tend to follow style and color trends more than other rooms, so they can appear dated more quickly. Many homebuyers also want the most up-to-date appliances in their kitchen, so it can really pay to renovate this room. In fact, a kitchen renovation generally has a 95 - 125% return on your investment.

Adding a bathroom usually pays between an 89 - 96% return and adding a family room can pay back more than 84% of your investment, making these the next two smartest home improvements. The main thing to keep in mind when remodeling is whether the project will increase the functionality and beauty of your home.

You also want to remember to remain consistent with other homes in your neighborhood. You never want to remodel your home so much that it’s valued significantly higher than surrounding homes. Altering the size or style of your home too much can also make it harder to sell.

Home Equity Lines of Credit (HELOCS) are the most popular way to finance home improvements. The rates adjust with the Prime rate, but you can run it up as needed and pay it down as you can – as opposed to a closed second where you have to take a certain amount of money in one lump sum and pay a fixed payment for 15 years. In terms of interest and finance charges they operate similar to a credit card, in that your minimum payment each month is the interest accrued on the amount borrowed (not the amount available).

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You've probably already heard that guidelines have tightened so that anyone who has had a foreclosure in the previous five years will not be eligible for conventional financing.

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