Homeownership is a huge part of the American Dream and for many, the bulk of their net worth is determined by their home value.
Recently the idea of renovations and remodels has become the topic of not just TV shows, but entire television networks so it is no surprise that the trend of home updates is on a steep incline.
With many people being motivated by updated function or aesthetics, another benefit of upgrading your home is that your personal net worth has the potential to be improved in the process.
The glamour of home renovation television shows is exciting to watch, but what they do not show is the financial aspect.
Before the first swing of the hammer, you will have to prepare your finances for a project of this size and determine how you will financially handle the responsibility associated with renovating your home.
Examine your current level of debt and your credit score this will help to determine for you if the timing to start this project since both factors will come into play if your plan to is take out a loan for your renovation.
When the time is right you can take out a personal loan to finance your next move, that is specifically tailored to help cover home renovation costs.
This might be a good choice as opposed to paying out of pocket or putting the cost on credit depending on your needs and the interest rate you are able to secure.
Interest rates on these types of loans are usually fixed, so be sure that you are not only just aware of that but also comfortable with what that means for your monthly payments as you repay the borrowed funds.
The penalties for defaulting on this type of loan will include a major hit to your credit score that can remain on your report for years, so since a large portion of your goal is to improve your financial health, signing for a loan you are not sure you can comfortably add into your budget is a less than desirable choice.
Choosing Your Project
It is no secret that kitchens and bathrooms sell homes, so those renovations will almost always yield a favorable return on investment. But choosing projects with a specific goal of increasing the value of your home to grow your net worth, extends beyond the pretty finishes and trendy must-haves.
For example, new siding might not excite you as much as heated bathroom floors, but it might excite your wallet.
Keep in mind too that regarding resale, just because you have upgraded a space does not mean that have increased the value dollar to dollar. In some cases, choosing projects that are too rich for the other demographics of the home can result in you investing money that you will not get back.
Upgrading the technology of your home to bring it up to date is another less glamourous but proven way to increase worth. With smart technology and convenience quickly becoming must-haves, you would be doing yourself a favor in the present and the future by investing in these upgrades.
Gadgets that improve the smart factor and safety of your home are generally considered to be safe upgrades to your home from an investment standpoint.
Creating square footage with a home renovation will increase its value undoubtedly, which in turn bumps up your financial situation as it pertains to your home.
Price-per-square-foot is the most common equation used to determine a home’s value and does not consider style or upgrades, so that is something to think about when you make decisions about how best to use your renovation budget.
The most obvious way to grow your home’s size is to add a room but finishing a basement or adding a deck are less common but not necessarily less significant ways to reach the same goal.
All things considered, there is no project that makes sense if it does not contribute to the livability of the home as it relates to you and the people you share your home with.
And even if you take out a personal loan to finance the project initially, it is ultimately your money being spent on these renovations so picking projects that allow you to live in your house, like your home and not just as your investment is money well spent.