Making the Most of a HELOC Loan

Making the Most of a HELOC Loan

The recent gain in home prices has had an unexpected effect: home equity lines of credit, or HELOCs, have made a resurgence, and along with these specialized loans has come an increase in spending on home renovations. But which renovations will increase your home’s worth in the long run, and which are a waste of funds?

What is a HELOC?
If you’ve seen the equity rise in your own home, you may be ready to start putting a little money back into it. A HELOC can be a great choice for making updates and repairs to your home. Although they are considered to be a type of second mortgage, HELOCs work a bit like a credit card: you have a set amount of funds available, and you pay interest only on what you use. You can then pay back the money you borrowed and let the funds sit until you’re ready to use them again.

Top Home Repairs and Improvements
Once you’ve decided to start making updates and changes, carefully consider where you’re going to spend your money. Whether you’ve been in your home for a while and are ready to improve on your investment, or you want to make some updates in preparation for putting your home on the market, certain home improvements have a greater return on your investment than others. Here are some of the updates that will help you maximize your profits, according to HGTV and Yahoo!.

Bathroom remodeling: Don’t go crazy here, but minor improvements such as replacing old caulking and aged shower doors and repainting could net you more than 100 percent of your costs. On the other hand, a more major renovation, where you expand the room, add storage, and install luxury fixtures, will still recoup about 93 percent of your expenditures.

Kitchen do-over: Keep it in check. Don’t try for a whole new floor plan; instead, replace old appliances, upgrade the countertops, run some recessed lighting, and resurface [rather than replace] old wood doors and drawers.

Attic conversion: This was a popular trend last year, and while it won’t recoup 100 percent of the cost you put into it, an attic conversion into an additional bedroom is a great selling point and may entice more buyers to bid.

Outdoors and downstairs: Adding a deck or patio or finishing a basement each recoup about 90 percent of your costs. Remember that outdoor improvements can have a big impact on homebuyers and can be fairly easy, while a basement can be quite costly to turn into an entertainment area.

Weatherproofing: Although you may not get the cash value back that you put into a new roof or windows, while you’re in the home you’ll see the benefits in lower energy bills.

Of course, your return on your investment depends on the housing market in your area as well, and on how much you enjoy the changes while you are still in your home. If you’re interested in learning more about how a HELOC can help you make repairs and updates to your home, give me a call today