An occasional home remodel is an important part of owning a house, and it’s very important that no part of the decision goes overlooked. Whether you’re interested in improved aesthetic appeal, a return on your investment, or your home just needs some work…
Here are six questions to ask before remodeling your home:
- Is it Affordable?
- Could I Use My Homes Current Equity?
- What Will My Return on Investment Be?
- Is My Home a Good Candidate?
- Should I Build a New Home?
- Should I Move to an Existing Home?
1. Is It Affordable?
The first question to ask about remodeling your home is whether or not it’s affordable. Whether you hire a contractor or take on the work yourself, begin with an accurate estimate of what the project will cost. You need to know what you can afford. This comes from knowing your credit rating. You should have that information at the front-end as you develop your remodel plan.
The best rates and terms go to homeowners with an A rating, which means no late payments in the last 12 months and no maxed-out credit cards. One or two late payments or overdrawn credit cards probably won’t knock you out of the game, but you might end up with a higher interest rate and a smaller loan.
Assuming there are no problems with your credit rating, your next step in determining what you can afford rests with how you plan to do the work: doing it yourself or hiring a contractor.
In either situation, begin with an accurate estimate of what the project will cost. Lenders will insist on a specific figure before they work with you. If you’re hiring a contractor, start with a firm bid, broken down into labor and materials. Then add on 10 percent for surprises.
On work you’ll do yourself, compile a detailed materials list with quantities, costs, and an accurate total. Include permit fees and equipment rental. Then add a cushion of 20 to 30 percent to be safe. Once you know how much you need, how much you can borrow depends on your bank account and credit rating.
2. Can I Use My Homes Current Equity?
About 50 percent of home equity loans are used to make home improvements, according to the US Census Bureau’s Housing Survey.
Home equity is the perfect place to turn towards for funds for remodeling your home. It makes sense to use your home’s value to borrow money against it to put dollars back into your home, especially since home improvements tend to increase your home’s value, in turn creating more equity.
With either a home equity loan or a home equity line of credit, money is borrowed against your home with the home itself serving as the collateral for the loan. But the difference between the two is that a home equity loan is a fixed loan with a set payment schedule and a home equity line of credit is a revolving line of credit with a variable interest rate and repayment schedule.
If you’re deciding whether or not to remodel, this is a question to ask that could be a deal breaker.
3. What is My Return on Investment for the Home Remodel?
Not all home improvements are created equal. That’s why ROI is a huge question to ask before remodeling. But studies show that these six will reward you the most when it comes time to sell.
According to a National Association of Realtors report, these projects are the best long-term investments to make when doing remodeling your home:
- Replacing Your Front Door — It’s the best in terms of transforming the look and feel of your home
- New Siding – Vinyl siding is low-cost, durable, and easy to install. It’s a low-maintenance feature that frees up your time.
- Kitchen Upgrade — the report notes you can expect a return of 67% on the $30,000 national median cost of a kitchen upgrade. 82% of homeowners said their updated kitchen gave them a greater desire to be at home, and 95% were happy or satisfied with their result.
- Deck and Patio Additions — These home additions can expand living space at a low cost of $8 to $35 per square foot — a bargain compared to the $150-and-up per-square-foot cost of another home addition, like a bump-out or room addition.
- Turning an attic into a bedroom is a good investment. You’ll gain living space without having to add on to your home’s footprint — the walls, floor, and ceiling already exist. That helps keep the costs of your remodel under control.
- New Garage Door— a new garage door provides a big boost for your home’s curb appeal at a relatively modest cost. A project that replaces an older, two-car, embossed steel door has a current cost of about $2,300, according to the report. If you sell, you can expect a healthy ROI of 87% on your investment.
All of these projects are:
- Low-maintenance
- Good — while not necessarily the highest — quality
- Energy-efficient
- Not too costly
4. Is My Home a Good Candidate for Remodeling?
This decision often comes down to where you are in life: young, middle age or near retirement. It will most likely lead to different decisions.
A growing family needs room to grow. A family with kids reaching college age or going out to work in the adult world may not need as much room.
It may be time to downsize, move, perhaps convert or remodel. A previous bedroom becomes a den or hobby room.
Families often face the prospect of becoming caretakers for an aging relative, or perhaps a spouse falls ill and a home needs to become more accessible. It’s time for yet another change in the configuration of your living space.
First, is your current house worth the remodeling investment? Is the structural design solid or do you have problems to address? Does your current neighborhood negate the value of a remodel?
Evaluate the school district where you currently reside:
- Is it on the upswing or are you in an area where schools are showing strain?
- Are public services in your local area thriving, or is funding for the area dwindling?
- Are the extra-curricular programs at nearby schools valued, such as music, art, and sports?
Once you answer these questions, make your plans, determine what you can afford, and move forward.
5. Should I Build a New Home Instead of Remodeling?
Some things to consider when choosing a building site for a new home:
- School District/Private School or Charter options
- Street, road, or highway traffic
- Size and layout of your yard, suburb, or acreage
- Commute time to work and attractions of interest
Check your credit report in anticipation of a new home loan, to make sure it’s accurate and up-to-date. Fix mistakes you find in your credit report.
Get prequalified for a construction loan and a home mortgage so you know how much you can spend.
Finally, do your research to determine a reputable contractor to build your new home. Look at work from previous builds. Then target the neighborhood, suburb or area where you want to build and live.
6. Should I Buy an Existing Home Instead of Remodeling?
It may be that you need more room, and are expanding; or downsizing and want something smaller.
The same checklist applies, as your decision was to build new:
- Check your credit report to make sure it’s accurate and up-to-date. Fix mistakes you find in your credit report.
- Get prequalified for a mortgage so you know how much you can spend.
Take a look at homes for sale in your market to get an idea of what you can get for your current home in the sale, and what you can get for your money today with a purchase of an existing home.
Before remodeling your home, ask yourself all of these questions.
Answering all of these questions is critical to your final decision. The old adage: location, location, location applies here. Do not overlook its importance.
In the end, choosing to remodel or move will rest on these factors outlined and your final decision on what is best for you and your family. Either way, these are important questions to ask before remodeling your home or choosing another option.
