5 Things to Consider When Deciding Whether or Not to Leverage Equity in Your House to Renovate and Remodel
You have been thinking about remodeling your home. However, you don’t currently have the disposable funds to do so without feeling a serious financial pinch in your day to day life. After doing some research (and asking around) you’ve realized that existing equity in your property can be the solution you need. That said, debt is debt, so you’re asking yourself, “Should I use home equity to remodel?”. Here’s what you should consider.
Are You Going to Stay in Your Home?
Ultimately, the best reason to remodel your home is your and your family’s enjoyment. Your home is a significant contributor to your quality of life, and if a remodel is the key to improving that, the renovations made possible via a home equity loan make great sense. This is especially true if you plan on living in your home for the foreseeable future, and more so if you want the home to be passed down to the next generation and the next (kids and grandkids).
If a new bathroom, kitchen, living room, or some inspiring extension will make your home far more livable and enjoyable for decades to come – it’s hard to argue against a home equity loan to facilitate it.
Are You Going to Sell Your Home?
Admittedly, the consideration above pulls on the ol’ heartstrings. It may not be the practical rumination you were looking for when searching “Should I use home equity to remodel?”. Let’s get to that.
On average, remodeling a home increases its resale value. Of course, this varies by type of renovation. A kitchen renovation typically boosts a property’s value by more than 12.5 percent, while a remodeled basement or a new bathroom has shown to increase a property’s value between 2.5 and 12.5 percent. If you plan on selling in the future and current rooms/spaces are in clear need of an upgrade, tapping into home equity can be smart investment that will deliver a lucrative ROI.
Are You Making it More Energy Efficient?
Another practical consideration with financial benefits, is a remodel done to make a home more energy efficient. It’s perfectly reasonable to use home equity if it will result in a 20-50% reduction in monthly utility expenditures. It can cost a lot of money to cool a home in the hot summers of the Okanagan Valley, then heat it in the well-below-freezing days of winter. If your renovations involve ways to solve that (better insulation, etc.) then your energy efficiency remodel ROI will roll in sooner than later. Further, there municipal, provincial, and federal tax credits along with other incentives offered to homeowners who make energy efficient upgrades.
Do You Want to Earn Monthly Revenue from Your Home?
If you still owe on your mortgage but have established enough equity to pull funds from it, you can remodel to make the property accommodating for the short term rental market (i.e. Airbnb). In doing so, you can use Airbnb to pay down your mortgage. And if you outright own your home, all the money to come from adding an extension to accommodate renters (short term or longterm) will be monthly revenue that goes into your pocket. In both scenarios, a home equity loan to remodel delivers an instant (upon completion) ROI.
Is There a Lower Interest Way to Get Money for Your Remodel?
Before using a home equity loan to remodel, find out if there are other loans available with lower rates of interest. It’s the most logical consideration here. A mortgage broker who specializes in home equity loans will help you compare options.
Where to Get Support for Your Home Equity Loan
After considering everything above, are you ready to use your home equity to remodel your home? Or do you have additional questions before pulling the trigger on equity-leveraged renovations? If located in the BC Southern Interior, get support today from Carloni Mortgage Brokers. We are here to help you every step of the way when it comes to home equity loans. Call us today to begin with a friendly conversation.
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