Home improvements are a great way to upgrade your home for aesthetics and energy efficiency. There are a variety of projects you can do, from inexpensive quick fixes, such as installing LED light bulbs, to the high-cost replacement of a heating and cooling system.
No matter the upgrade, there are ways you can save money on home improvements. You can do the work yourself, find low interest rate loans or select affordable contractors. In this blog, we will explore how you can spend smarter on home upgrades this summer.
Average Costs of Home Improvement Projects
The cost of tackling home improvement projects can add up quickly. The average cost of renovating an entire house ranges from $19,483 to $88,387, according to Angi.com.
Here are the most common upgrades and their average costs:
- Interior Painting: Painting your home’s interior could be an easy DIY that saves you money if you have the time and ability to do the work. If you plan on hiring a professional, the average cost is between $1,000 and $3,100, with homeowners spending an average of $2,100.
- Bathroom Remodel: A bathroom upgrade runs between $6,700 and $17,700 if done by a professional. There are a few things you may be able to do yourself to save money, such as replacing shower heads, the vanity or a sink.
- New Flooring: Replacing your floors is a great way to freshen up your home and increase its value. The average cost of installing new floors is about $5,000 for a 400-square-foot room. The cost varies by the type of flooring and room size. Shop for materials that fit your taste and your budget.
- Window Replacement: Your home’s windows tend to become drafty and outdated over time. Swapping them out with more efficient ones is about $700 per window, plus labor. Shop around as window companies usually have promotions and offers that make this work more affordable.
- Updating Appliances: Appliances can stop working or become energy hogs over time. Replacing them with new, energy efficient appliances costs between $970 and $7,000, depending on the type of device. Shopping sales and buying refurbished machines could save money. Alternatively, regular maintenance on your current appliances can save you from having to replace them.
- Installing New Fencing: If your property is fenced, chances are you will need to replace it over time. Installing a new fence could cost anywhere from $1,900 to $4,800. The upside is that you could see a 50% return on increased home value. Installing the fence yourself will save you money on labor.
As you can see, the cost of home improvement projects varies greatly. If you use a professional, remember to get at least three bids to gauge if you’re getting a fair offer. When you’re ready, decide whether you want to use existing savings or borrow money to pay for your projects.
Saving for Home Improvements
If you intend to use savings to pay for your projects, planning goes a long way. Preparing for expenses a year or more ahead of the actual work gives you time to save. This is ideal because you can improve your home without obtaining additional debt, according to CNBC. If you own a new home, saving for future projects is more doable because everything is new and will last longer.
If you own an older home, there might be less time and greater urgency to do the work. Sometimes, borrowing for your home improvement projects is unavoidable. If that’s the case, do your research and find the best lending option for your budget.
Financing Your Projects
There are a few ways you can borrow confidently for your home improvement needs. Because you are a homeowner, the best way is to use home equity financing, which typically comes with a lower interest rate than credit cards and personal loans.
Here are some lending options to fund your home improvement projects:
- Home Improvement Loans/Personal Loans: These are unsecured loans that let you borrow a lump sum of cash which you’ll pay back in monthly installments. They are good for smaller home projects because these loans are usually quicker to process and fund by the lender. On the downside, unsecured loans tend to have higher interest rates that could impact how much you pay over time.
- Home Equity Line of Credit: As mentioned, borrowing from your home equity is a smart way to pay for upgrades. One way is to use a home equity line of credit (HELOC), which is a secure loan that’s tied to your home. With a HELOC, the financial institution issues you a line of credit that you can draw upon as needed for a period of time — typically 10 years. After that, the loan becomes ineligible to borrow from and you pay it back monthly over 15 years.
HELOCs start with a variable rate that fluctuates based on market conditions. Once the loan is converted to a fixed rate loan during the payback period, the interest rate is locked in. Some drawbacks for HELOCs include the variable rate and risk of foreclosure if you default.
- Home Equity Loan: A home equity loan is another way to borrow backed by your home as collateral. Instead of a credit line, you borrow a lump sum of money, the amount of which is based on your home’s equity. Interest rates are fixed on this loan, making it a good option for homeowners who want a predictable, monthly payment.
A home equity loan ensures you do not overspend, compared to a HELOC. Drawbacks include the risk of foreclosure if you default on the loan and the potential for an underwater or upside-down mortgage if property values decrease below the amount you owe.
- Cash-out Refinance: This type of loan requires refinancing of your first mortgage and taking additional cash out from the home’s equity. With this method, you will have a new mortgage with one monthly payment that covers your existing mortgage balance and the cash you took out. Your interest rate and loan term will change, too, and be based on the current market.
Since this is a home loan refinance, there are additional costs that come with it, such as appraisal fees and closing costs. Still, this is another way to use your equity to fund projects that could improve your home’s value.
Finding the right lending option takes research and time. Be patient and shop around to find the loan that best fits your needs.
How Travis Credit Union Can Help
Travis Credit Union has a variety of lending options to help finance your home improvement projects, including home equity loans, HELOCs, personal loans and a list of mortgage refinance options. TCU also has energy efficient loans that make it easier to finance your upgrades.
TCU is focused on your financial wellness. Visit our free Knowledge Base for a list of online financial education courses that can help you plan, save, spend and borrow better.