The Role of Home Equity Loans in Increasing Resale Value

Utilization of a Home Equity Loan to Increase Resale Value

You can use a home equity loan to increase your home’s market value. You may be eligible for new financing options, such as a greater initial payment or a lower APR, when you refinance your existing mortgage. This allows you to make a higher down payment, pay off high-interest loans, or reduce your mortgage balance.

Home equity loans allow homeowners to borrow against their home’s equity without having to liquidate the equity or sell the property. Additionally, they provide borrowers with a lower interest rate than typical home equity loans, and some lenders offer lines of credit instead of loans. Within two weeks, homeowners who take out home equity loans typically get cash in the form of a cheque or direct deposit into their bank account.

House equity lines of credit (HELOC) are secured short-term loans that enable you to borrow against the value of your home to finance purchases, renovations, debt consolidation, or any other purpose. HELOCs, unlike home equity loans, do not demand collateral, thus you do not need to sell your primary house to obtain the funds. In lieu of collateral, you promise a portion of your home’s equity. The lender will then obtain a lien against your property. If you default on your mortgage, you risk losing your home.

For the greatest return on investment, also known as ROI, the house must be sold within one year after the completion of the renovations. This equates to an average return on investment of 64,44%, according to a research by Remodeling Magazine on 30 of the most popular restoration projects.

This is a challenging situation for a homeowner who wants to sell their home, as opposed to someone who wants to dwell in their newly constructed home. If they opt to take out a home equity loan, their equity will be used as collateral.

Here are some of the best ways to maximize the return on investment through renovations. Everything is contingent on the potential of selling the home within a year:

Convert the attic into a bedroom.

Converting an attic into a bedroom generated a ROI of 83%. This modification increased the value of a home by $39,000 on average. Adding bathrooms, as well as strengthening the floor, insulating, and completing the space, will incur the greatest costs.

Simply adding insulation to the attic, which costs an average of $1,268 in the United States, results in a 116 percent cost recovery.

Kitchen Remodel

A return on investment of 85 percent. The most profitable projects are those that cost between 6 and 10 percent of the home’s value. Countertops (74 percent), wallpaper and paint (70 percent), cabinets (67 percent), and flooring (67 percent) were the most popular things to be replaced during kitchen renovations (64 percent).

The second most requested project, accounting for 70 percent, is kitchen remodeling, which costs an average of $56,780. A moderate kitchen makeover, with an average cost of $20,142 and an 83 percent return, provides a better return.

According to Reagan Toal, marketing manager for Federal Brace, a company that supplies countertops with supports, most modern kitchens are obsolete in terms of technology, accessories, design schemes, and layout. The kitchen can be fairly uncomfortable due to poor patterns of movement and extra equipment.

Toal also noted that “expanding the kitchen, creating an open floor plan, or simply reevaluating the current structures to create a more expansive feel can not only increase the homeowners’ enjoyment of their kitchen, one of the areas of the home where most people spend a great deal of time while conscious,” but it can also increase the value of their home.

New doors

According to Northshore Fireplace, a new metal front door offers a ROI of 101 percent. Otherwise, the return on investment (ROI) will decrease. The business recommended that the front door suit the style of the home and not be too extravagant.

This is higher than the 91% return on investment Remodeling Magazine discovered for a steel door costing $1,335 in 2016 or the ROI of 82 percent for a fiberglass entryway that cost $3126.

The replacement of a garage door is a good investment at 91 percent with an investment of $1,652 as per Remodeling Magazine.

Alteration to the siding

A return of 80 percent for vinyl siding, according per Northshore Fireplace’s calculations. According to 2015 data, the ROI for fiber cement siding is 84 percent and for foam-backed vinyl it is 77 percent.

Estimates for siding include factory trim on each opening and corner and total 1,250 square feet.

In 2016, Remodeling Magazine reported that 78 percent of the market went to engineered siding replacement, while the vinyl business had 73 percent.

Bathroom Renovation

A 65-percent ROI. The average cost of a bathroom renovation in the United States is $17,908. This is the most frequently requested remodeling project.

A mid-range bathroom renovation costs $42,233 and returns 56%.

In general, a bathroom redesign is not a very lucrative investment, but it is the most frequently requested remodeling project in the country. It might be considered one of the most expensive home renovation tasks.