Lessons On Loans

If you desperately want to undertake a home remodeling project, but aren’t sure whether you can afford it, don’t despair. Depending on the type of renovations you want, a variety of loans are available, and with some home remodeling projects you can even recoup a high percentage of the cost at resale.

Home Equity Loan
For a major home renovation, you might want to consider a home equity loan. This is essentially a loan taken against the increased value of your home, also known as a second mortgage. It might be worth it if you’re undertaking a remodeling project that’s likely to add value to your house.

You can choose to take out either a standard home equity loan, which is a one-time lump sum that you pay off over time, or a home equity line of credit (HELOC), which works more like a credit card with a limit and you can borrow up to that amount within a certain time period. For either of these, you have to pay off any debt that remains when you sell your house.

When Is It Worth Getting a Home Remodeling Loan?
Certain types of home renovations, whatever their cost, tend to recoup more of their value at resale better than others. In 2006, top remodeling projects and the average percentage they recouped at resale nationally are:

• Siding replacement (especially with new vinyl siding): 87.2%
• Minor kitchen remodel: 85.2%
• Window replacement: 85.3% for wood and 83.7% for vinyl
• Adding a deck: 76.8%
• Mid-range bathroom remodel: 74.9%
• Adding a bathroom: 74.9%

You may also be able to apply for an energy-saving loan through your local utility company to pay for energy-efficient upgrades, such as insulation or a new HVAC system. And, you'll probably save money on your utility bills as well.

Sources
Bankrate.com, Home remodeling: pick renovations that pay off
RemodelingOnline, Cost vs. Value Report 2006

About the Author
Laura Horwitz has worked as a freelance writer and researcher for five years in both London and the US. She had a monthly landscaping and tips column for the Sussex County magazine RH Review, and her articles have also appeared in Film Focus, 6 Degrees Film, and BizBash magazine.