Saturday, 5 December 2020

The 10 Most Popular Home Improvement Projects and How to Pay for Each

Are you interested in improving your home but unsure about which upgrades to prioritize? Here’s a collection of the most popular home improvement projects for your consideration, as well as tips on how to pay for each of them.

A project that’s popular among homeowners also might be a hit among homebuyers, making it a reasonable investment. However, no matter which project you pick, remodeling is a good financial decision only if you can afford it.

What are the most popular home improvement projects?

According to a survey conducted by the National Association of Home Builders (NAHB), the 10 most popular remodeling projects for 2017 were:

  1. Bathroom remodels
  2. Kitchen remodels
  3. Whole-house upgrades
  4. Adding rooms
  5. Replacing windows and doors
  6. Adding or upgrading decks
  7. Repairing damage
  8. Finishing basements
  9. Handyman services
  10. Replacing or repairing roofing

Kitchens and baths have long been the most popular remodeling projects, and the demand for upgrading these rooms has remained relatively steady. However, second-tier remodeling projects such as whole house remodeling, adding new rooms, and replacing windows and doors became decidedly less popular in 2017 compared with 2016, even though they remain at the top of the list of projects for homeowners.

Chart Showing Popularity of Second-Tier Remodeling Jobs

Image credit: National Association of Home Builders

Deciding which home improvement project to do

Just because a remodeling project is popular doesn’t mean it’s worth doing, especially since many of these projects are expensive. The national average kitchen remodel cost about $22,300 in mid-June 2018, according to Home Advisor, while a bathroom remodel ran an average of about $9,700.

Before shelling out big bucks, consider the following questions for each of the projects:

  • How much value will the remodel add? If you’re not planning to move, and the primary goal is to make your home more livable, the remodel’s impact on the home value doesn’t matter much. But if you’ll be selling soon, it doesn’t always make sense to upgrade unless the improvements lead to a higher selling price.
  • What’s the likely return on investment? Some projects increase the value of your home more than others. You can find information online about home improvement projects with the best return on investment, but talking with a real estate agent who knows your local market is your best bet.
  • Are you overimproving your home? If you improve your home so much that it’s worth significantly more than other houses in your area, you might have a hard time finding a buyer willing to pay the higher price.
  • Can you afford the project? If you can’t find a way to finance the project, it doesn’t matter how appealing it is or how much value it will add. That’s why it’s best to research both the most popular home improvement projects and ways to pay for them.

How will you finance your home improvement project?

If you’ve decided a remodel makes sense, here are your next steps:

  • Determine the amount you’ll need to spend. Obtain quotes from licensed contractors, and make sure they include details about materials. Sometimes, quotes have allowances, such as $1,000 for granite countertops. If yours does, find out what you can buy with the allowance. If you have to pay more for upgraded materials to get what you want, the costs will be higher than planned.
  • Decide when you’ll start the project and pay: Typically, you shouldn’t pay for an entire project upfront. You’ll make an initial deposit for materials and pay more as each phase of the project is completed. Agree in advance on the project’s time frame and when payments will be due.
  • Leave wiggle room in your budget: Big construction projects often have cost overruns, too, so assume you’ll need a little more money than you expect and budget accordingly.

The good news is that payment options typically won’t vary from project to project. The same funding sources work whether you’re redoing your roof, remodeling your kitchen, or redoing the whole house. Here are a few ways to finance your project:

Pay with savings

Paying out of savings typically is the best approach because you can avoid interest charges. However, saving up for a big project is challenging. If you hope to pay cash, consider following these steps:

  • Calculate how much to save each month: You’ll want to meet your savings goal for the project by its start date.
  • Create a budget that includes savings: Make sure you can save the necessary amount while fulfilling other financial obligations. You might need to consider a doing a side hustle or cutting your spending.
  • Move money into savings: Create a separate savings account for your remodeling project. Consider automating transfers from your checking account so that money is moved to the remodeling account each payday to ensure you hit your savings goals.
  • Ask about a cash discount: Some contractors may reduce the price if you don’t need to finance the project and can pay in full.

Pay with a home equity loan

If you have equity in your home, you can take out a home equity loan or home equity line of credit to fund home improvements and repairs you can’t afford to pay for with savings. Here are some issues to consider.

  • You need to have enough equity in your home. Many lenders won’t give you a loan if you’d end up owing more than 80% of what your home is worth after the loan is approved.
  • Interest rates on a home equity loan generally are lower than those on a personal loan or credit card, and the interest paid typically is tax-deductible.
  • You might need to pay for an appraisal to prove the value of your home.
  • Your house serves as collateral for the loan, so you’re putting it at risk if you can’t repay the amount.
  • By borrowing against your home, you could end up owing more than the amount you could sell your house for, which could make it difficult for you to move.

Pay with a personal loan

If you don’t have enough savings, personal loans are another option if you can qualify based on income and credit score.

  • Personal loans generally are unsecured loans available from online lenders, banks, or credit unions.
  • Personal loans generally can be used to fund any project because they typically have few restrictions on what you can use funds for.
  • You can apply online with most lenders.
  • Fixed- or variable-rate loans are available. With fixed interest rates, the monthly payments are the same for the life of the loan.
  • Different lenders offer different repayment terms. Decide if you want to pay off your loan quickly and pay less interest by making higher monthly payments, or if you’d rather stretch out repayment to keep monthly costs low but pay more interest over time.
  • On the downside, home improvement loans often can carry relatively high interest rates — sometimes as high as 35% — so they might be more appropriate when it’s essential to make the improvement, such as for safety reasons, for example.

If you opt for a personal loan, it’s important to choose the right one. Check out the six best personal loans for home improvement to compare lenders and find a loan that works for you.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!

Lender Rates (APR) Loan Amount  
1 Includes AutoPay discount. .
2 .
* .
7.73% – 29.99% $1,000$50,000
6.28% – 15.62%1 $5,000$100,000
6.87% – 35.97%* $1,000$50,000 Visit Upgrade
8.00% – 25.00% $5,000$35,000
4.99% – 29.99% $10,000$35,000 Visit FreedomPlus
5.99% – 18.99%2 $5,000$50,000 Visit Citizens
15.49% – 34.49% $2,000$25,000 Visit LendingPoint
5.99% – 35.89% $1,000$40,000 Visit LendingClub
5.49% – 18.24% $5,000$75,000 Visit Earnest
9.95% – 35.99% $2,000$35,000 Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Source: https://studentloanhero.com/featured/most-popular-home-improvement-projects-and-how-to-pay-for-each/

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