Completing a Home Remodel Project in the Spring or Summer

If you've been binge-watching home remodeling shows lately, you have probably been wondering about actually starting a project yourself. Fortunately, the coming spring and summer might be among the best times to get to work on that idea you've been mulling over since the beginning of winter. With home values on the rise for a few years running, more homeowners are taking out loans through their home equity or another means, and putting some investment dollars back into their house.

Perhaps as a result of more sales volume and increased competition, the average cost of many popular home renovation projects is declining. According to statistics on remodel costs  compiled and tracked by Remodeling Magazine, many of the most valuable projects are getting less expensive in 2017.

In terms of return on investment, the most valuable home renovation is attic insulation. At the national average price tag of around $1,300, Remodeling estimated new attic insulation could be expected to return more than 100 percent of its cost when it comes time to sell. This job has been among the top contenders for best ROI for several years, and compared to the 2016 average, it's getting cheaper. A few of the other most value-driven home projects are also familiar to those who track these statistics - a new front door, a new garage door or a small-scale kitchen remodel remain some of the best projects for homeowners who want to invest in their property.

However, many of these projects don't just require a significant financial investment upfront - they also must be carefully planned from start to finish if ROI is a priority. Even when contractors and other professionals are involved, homeowners still should put in some elbow grease when it comes to research, designing and financing home renovations.

Yes, you need a budget

As real estate news website HouseLogic wrote, any home remodel project can turn into a nightmare without a good deal of planning beforehand. That's because there are almost always some "surprises" along the way - HouseLogic spoke to one homeowner who had been planning to remove built-in bookshelves from her living room. Initially, she assumed it would be a straightforward, inexpensive DIY project. But upon removing the structures, she discovered "a hidden subfloor made from asbestos(!) tiles. She hadn't budgeted for a new subfloor - or for the removal of a toxic substance. Yikes."

That was only the beginning of this homeowner's troubles, but they could've been avoided with an extra ounce of foresight. To make an effective budget and stick to it, HouseLogic and others recommend:

• Reconsidering DIY projects: If you have the skills, tools and patience, there are many home projects that can be completed inexpensively. But homeowners should also know where to draw the line and hire a contractor, for financial as well as safety reasons. Projects involving electrical work, plumbing or other special expertise should be completed by a trained pro.
• Thoroughly vet contractors: Rely on recommendations from friends and family, or ask contractors for at least two references to find the best.
• Leave extra budget room: This is where a HELOC might come in handy, as it would allow plenty of cushion in case work doesn't go as planned (and as we know from Murphy's Law, it almost never does).

Financing projects: Refinance or HELOC?

It's in every homeowner's best interest to be strategic with every home remodeling project or repair. As previously mentioned, it's common for well-established owners to leverage the equity they have built up in their homes to help pay for this work. But there could be other financing options that might work in a homeowner's favor.

A HELOC is a popular option for homeowners who want to quickly convert equity stored up from mortgage payments and rising property value into cash to pay for renovations. Ideally, the ROI from these repairs or additions would outweigh the cost of a HELOC, which essentially functions like a second, smaller mortgage. However, if the home's value begins to fall, or the owner runs into financial hardship later on, a HELOC may turn out to be an expensive choice.

A possible alternative is a refinanced mortgage. As noted by a panel of financial advisors, a refinanced mortgage could be a better deal  than a HELOC if the homeowner can secure a much lower interest rate on the new loan, and if they planned to stay put for at least another five years. The savings from the lower mortgage payments could be diverted into funds for home improvement projects. But refinancing is difficult for borrowers with poor credit, and has its own fees associated. Besides, refinancing is only a smart move if the original mortgage had a high interest rate. Anyone who bought a home in the last five years probably has a much lower interest rate than could be secured today.

Finally, homeowners could decide to simply take out a personal loan to pay for home improvements. However, this may not be the most financially sound decision,  Nerdwallet explained. For one, personal loans tend to come with much higher interest rates than a HELOC, and could be even more difficult to obtain than a refinanced mortgage. On the other hand, some personal loans designed specifically for home renovations could prove worthwhile. Nerdwallet pointed out that many financial institutions, local organizations and the federal government offer low-interest home improvement loans. The U.S. Department of Housing and Urban Development runs a program specifically for residential projects that focus on energy efficiency upgrades.

Ultimately, anyone planning a home remodel or renovation in the coming months should always weigh their financial options carefully. Make detailed plans of where the money will be spent, including some room for error when surprises come up along the way. In the end, homeowners who came prepared to a project, whether large or small, will be rewarded with a more valuable, more useful home than the one they started with.

Talk to your local Vectra Bank professionals for more information about home equity loans and lines of credit.