Refinancing Options to Pay for Your Home Renovations

Blueprint coupleAccording to Zillow, the median home value in Washington at the end of 2018 was $379,300. That’s a 7.9 percent increase from prices at the end of 2017. Zillow is currently forecasting an additional 5.8 percent increase over the next year.

Washington is a pricey state in terms of residential real estate, which can be both positive and negative for homeowners. Your investment is appreciating in value, which is always good, but you may be feeling stuck in your current home because purchasing an upgrade is so price prohibitive, which is bad.

So what can you do if you want a new home but can’t afford the high price? Many Washington homeowners are turning to home remodeling instead. Even if you can’t afford to buy your dream home, there’s nothing stopping you from attempting to transform your existing house into your dream home.

Quality of Life, ROI or Both

There are really two types of home renovations; those you make to increase the value of your home and the ones you choose to improve your quality of life. Ideally, there should be overlap between the two. If you can, try to identify home improvements that will allow you to enjoy your home environment more while simultaneously improving its appeal to future buyers.

According to Remodeling Magazine, the renovation projects with the highest recoup value were:

  1. Garage Door Replacement: 98.3 Percent Cost Recouped

  2. Manufactured Stone Veneer Siding: 97.1 Percent Cost Recouped

  3. Steel Entry Door: 91.3 Percent Cost Recouped

  4. Wooden Deck Addition: 82.8 Percent Cost Recouped

  5. Minor Kitchen Remodel: 81.1 Percent Cost Recouped

  6. New Siding: 76.7 Percent Cost Recouped

 

HGTV has also put together a list of their Top 15 Home Updates That Pay Off:

  1. Minor Bathroom Remodel: 102 Percent Cost Recouped

  2. Landscaping: 100 Percent Cost Recouped

  3. Minor Kitchen Remodel: 98.5 Percent Cost Recouped

  4. “Exterior Improvements”: 95.5 Percent Cost Recouped*

    1. They lumped together exterior paint, new siding, new entry doors and garage doors into one category.

  5. Attic to Bedroom Conversion: 93.5 Percent Cost Recouped

  6. Major Bathroom Remodel: 93.2 Percent Cost Recouped

  7. Major Kitchen Remodel: 91 Percent Cost Recouped

  8. Deck, Patio or Porch Addition: 90.3 Percent Cost Recouped

  9. Basement Remodel: 90.1 Percent Cost Recouped

  10. Replacement Windows: 89.6 Percent Cost Recouped

  11. Family Room Addition: 83 Percent Cost Recouped

  12. Bonus Room Conversion: 72.8 Percent Cost Recouped (Average)*

    1. Different types of rooms offer different values. In some cities, like Seattle, adding a full bath (which cost $22,977 on average) recouped more than 100 percent.

Hopefully, the things you’d like to improve about your home overlap with the most lucrative home improvements.

You should also take into account how long you plan on staying in your home when choosing whether to remodel for valuation or pleasure. If majorly overhauling your kitchen to make it just the way you want it will significantly improve your day-to-day life, and you plan on staying in your home for another 10 or 20 years, then you should absolutely redo your kitchen. If you think you’ll move within the next few years, it may not be worth the investment.

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Who Are You Making These Improvements For?

If you don’t plan on being in the same home five years from now, it may make more financial sense to make minor changes that will appeal to current homebuyers rather than choosing based on your own tastes. You can always put that dream kitchen on your wish list for your next home.

Keep in mind, popular styles are fluid, and can change dramatically in just a few years. If you plan on moving in the near future, it’s definitely worth your while to do some research on current design trends.

Bold, vibrant interior colors are currently in. Although variations of white are still popular for kitchens, there’s been a definite turn towards warm wood tones and neutrals. Farmhouse sinks have also become popular, usurping the traditional white and stainless-steel kitchen sinks. Darker colored sinks composed of granite, copper, concrete and other stone are definitely becoming more popular design choices in kitchens and bathrooms.

Trough and bucket sinks in the kitchen, oversized floral patterns and vintage light fixtures, such as sconces, chandeliers and lanterns are also enjoying a resurgence in popularity.

Concrete accents, floors and countertops are also trending, which is a plus from a cost perspective.

What’s popular today may not appeal to homebuyers five or 10 years from now, so be cautious with getting overly outlandish with your remodeling choices.

Funding Your Home Remodel by Refinancing or With a Rehabilitation Loan

Refinancing is a great way to fund home improvements. You may even be able to refinance to a lower rate or better term and get cash out of your home to pay for remodeling.

If you don’t have existing equity to fund your home improvements, a rehabilitation loan might be the right choice for you. Rehabilitation loans can be used for anything from small upgrades, to major renovations. By using funds from your home refinance or renovation loan to pay for home renovations, you are increasing the value of your home without having to dip into your own savings, ultimately resulting in a net gain for you as the owner.

If you live in west Washington or northern Oregon and are looking for a partner to help you refinance your home, contact Bank of the Pacific. We can give you an array of mortgage refinance options and explain which is best for your situation.

Contact us, visit one of our many branch locations or call us at 888.855.8267 for more information on our home loan refinancing services.