Adding Value to Your Home with Renovations: Which Projects Are Worth Financing?
When planning a home renovation, it’s essential to choose projects that not only improve your living space but also add to your home’s value. Smart upgrades can increase your home’s resale potential and boost your equity. Here, we’ll explore renovations that offer the highest returns on investment (ROI) and discuss how financing options, such as home equity loans or lines of credit, can help you get started.
High-ROI Renovations to Consider
- Kitchen Remodel
A kitchen remodel can offer up to an 80% return on investment. Updated cabinetry, countertops, and appliances attract potential buyers and elevate the daily living experience. For a major remodel, a home equity loan or line of credit can provide the funds to make a lasting impact. - Bathroom Remodel
Bathrooms are another key space that can add significant value. Small improvements, like updated fixtures or new tile, can offer a solid ROI. For more extensive remodels, a cash-out refinance or home equity loan might make sense. - Energy-Efficient Upgrades
Enhancements like new windows, improved insulation, or solar panels not only cut down on energy costs but also attract buyers looking for eco-friendly homes. Renovation loans that focus on energy efficiency may be worth exploring, particularly if you’re interested in federal incentives. - Outdoor Living Spaces
Decks, patios, or landscaped gardens can improve curb appeal and provide more living space. Depending on your goals, a HELOC (home equity line of credit) can give you flexible funding for a gradual upgrade.
Financing Options for Home Renovations
- Home Equity Loan
Ideal for large projects with a set budget, home equity loans provide a lump sum with a fixed interest rate. You can rely on these loans for bigger upgrades, like kitchens or bathrooms. - Home Equity Line of Credit (HELOC)
With a HELOC, you borrow as needed, which works well for multi-phase projects or smaller renovations. The variable interest rate offers flexibility, especially if you’re planning multiple projects over time. - Cash-Out Refinance
For homeowners looking to take advantage of lower interest rates, a cash-out refinance can be a smart choice. You can refinance your mortgage to take out equity, giving you funds for renovations with the potential for long-term savings. - Renovation Mortgages
For those buying a fixer-upper, renovation mortgages (like FHA 203(k) loans) allow you to finance both the purchase and renovation costs. This can be especially beneficial if you’re eyeing a property with potential but needs significant work.
Tips for Choosing Value-Boosting Renovations
- Set a Budget and Stick to It
Use your financing options wisely. Set a clear budget before starting and consider the cost of each renovation compared to its expected ROI. - Think About Future Buyers
If you plan to sell, focus on renovations that have broad appeal, such as open floor plans, updated bathrooms, and energy-efficient upgrades. - Prioritize Structural and Essential Repairs
Before diving into cosmetic changes, make sure the foundation, plumbing, and other essential systems are in top shape. These are the backbone of any home’s value and may even be necessary for some financing options.
Renovations are a powerful way to increase your home’s value and create a space you love. With a strategic approach and the right financing option, you can bring your renovation dreams to life while building home equity. For guidance on financing your next renovation, contact First Ohio Home Finance—our experts can help you find the best loan for your goals.
