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Home & Garden Articles
Home Improvement - Can You Really Recover Your Costs?
Wed 23 May 2007 - 13:02
Home Improvement - Can You Really Recover Your Costs?
By Bob Darron
Armed with home improvement equity loans and unheard of appreciation in property values, homeowners have updated their kitchens, remodeled bathrooms, landscaped gardens and finished basements at a dizzying pace. Record low interest levels made home improvement loan rates very attractive. Until recently, the assumption has been that the appreciation in housing would return that home improvement investment and more.
But as anyone whose ever taken out a home improvement loan to make upgrades to their house, it doesn't take a lot of remodeling to burn through a lot of money. With the average kitchen remodel alone costing $44,000, it's much easier than you might think to turn the cost-versus-value equation on its head. As some professionals in the home improvement field point out, once you start the remodeling and upgrades on one room, the rest of the house doesn't look nearly as good as it did. Therefore, despite low home improvement loan rates, it still takes a lot of money to upgrade an entire house.
According to president of the American Homeowners Association in Stamford, Connecticut, Richard Roll, "This is an issue because of how aggressive the home mortgage lenders have been" in approving home improvement loans to cash-strapped borrowers. A homeowner could be in a position where they need to get 105 percent of the total debt on the property but can only get 98 percent of that from a buyer. Those who can afford to sell at a loss must pay the difference out of pocket and those who can't afford it, have to face the choice of remaining in a home that no longer meets their needs, or losing the house if they can't make their loan payments.
Over the last 10 years, tons homeowners have taken advantage of the home improvement loan rates and are spending more than half the value of their home on improvements. People have moved into older, smaller homes and looked on the upgrade as an investment.
Most homeowners though, should take a hard look at their neighbors before dropping another dime on high-priced upgrades. Not in the sense of the "keeping up with the Joneses" type of attitude, but more so because comparable sales prices are a good place to get started when considering getting a home improvement loan to make upgrades. Any good realtor can tell you what additional value would be added to your home in whatever type of remodeling you're thinking of doing and whether any improvements you might make are out of tune with the neighborhood. Quite a few realtors feel that exterior home improvements are by far the better investment than interior upgrades.
However, the fact that some exterior home improvements are a good investment, does not leave out some inside jobs. Obviously tending to major repair work such as plumbing and electricity is a more important home improvement than high class landscaping, but it won't necessarily increase your home's value if that's the main reason your looking to make improvements.
Generally speaking, although you won't recover the full cost of any home-improvement project, some clearly boost value better than others. For example, you'll recover nearly 99 percent of costs on a minor kitchen remodel, 96 percent on a midrange siding replacement and 95 percent on a two-story addition, according to Remodeling Magazine's 2005 Cost vs.Value Report. While a few home improvement jobs, including an upscale siding replacement and a midrange bathroom remodel will yield more than a 100 percent return, professional realtors tend to agree that a good landscaping makeover is a critical exterior home improvement that can bump a home's value up to seven percent. But ultimately, any decision to repair, upgrade and or remodel your home's interior or exterior should be looked upon with caution especially if you are obtaining a home improvement loan to do so.
Bob Darron enjoys writing on a number of homeowner related financial topics including Home Improvement Loans, Home Equity Loans and Home Equity Lines of Credit. He invites you to visit http://www.HomeImprovementLoan4Me.info to discover the pros, cons and financing options available for home improvement projects that will add both beauty and increase the value of your home.
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