Not every home improvement adds equity to your home value immediately. If you’re about to drop $45,000 on a new gourmet kitchen, your own pleasure in that kitchen should be at least as valuable to you as what it does to increase your home equity.
The Hanley Wood Construction Industry Database estimates a 62% increase in home value for a major kitchen remodel. That’s about the middle range for return on investment with big improvement projects.
The No. 1 home improvement for building fast equity has always been a fresh coat of paint shortly before you sell.
Big Home Improvement Money
If you want a Big Bang for your remodeling project, think about a handyman special to gain a financial foothold with your first home.
If you can’t afford your dream home, now is the time to ask relevant mortgage questions.
Ask about a FHA 203k Loan that is specifically designed to wrap remodeling costs into the purchase loan.
The 203k and similar loans are a genuine path to home improvements with reasonable interest rates.
The costs are also paid back over the length of the mortgage rather than in the much shorter time frame common to many remodel loans.
The 203k also comes with some professional assurance that the remodel will add equity to your new home.
An important qualification: the loan amount is set as “the value of the property before rehabilitation plus the cost of rehabilitation, or 110% of the appraised value of the property after rehabilitation, whichever is less.”
One of the first mortgage questions you should ask is whether the lender offers government-backed loans such as the 203k.
6 Handyman Improvements
You may not want to tackle a damaged foundation, but many low-cost improvement projects add more to your home value than expensive projects.
- Repairing ceilings and walls by patching, painting and replacing wallpaper.
- Floors need to be done to finish the rooms. This means new carpet, tile, stripping and sealing hardwood and replacing baseboards.
- Also relatively low cost: replacing light fixtures, ceiling fans and even electrical outlets and light switches.
- Instead of a major kitchen remodel, you’ll gain more home equity by simply replacing or refinishing kitchen cabinets.
- Handyman specials often have cracked windows and broken doors needing repairs.
- If you want at least one big project, additions are often the answer in older homes. Another bathroom is a good choice to increase value with an addition.
Mortgage Questions: Location, Location, Location
When it comes to a handyman special, you don’t necessarily want the biggest, most elaborate home in the neighborhood. Dollar for dollar, improving the lowest-cost home in a desirable neighborhood increases the value much more than the nicest and priciest home in the same neighborhood.
Entry-level homes are in the highest demand today. A good fixer candidate is a three-bedroom with a two-bath house built in the 1980s that will benefit from these inexpensive remodeling projects.
It all begins by asking the right mortgage questions now that you know at least six home improvements that build equity.
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