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Thinking of adding a main bathroom with separate tub and shower to your home? Maybe you're ready to ditch those old kitchen cabinets and replace them with something fresh. Or maybe you're eager to build that sunroom you've always wanted.
If so, you're not alone. Plenty of homeowners are tackling home improvement projects this year, a trend that's only grown during the COVID-19 pandemic. Houzz, an online home remodeling service, said that home renovation professionals saw an increase of 58% in project leads in June.
But which home-improvement projects make the most financial sense? Which bring the greatest increase in sales price when you are putting your home on the market?
Here's a look at the best home improvements for resale.
Why Invest In My Home’s Resale Value?
Knowing your home’s value is important when you plan to sell your house. This value will help you estimate how much profit you can expect when selling. If your home is worth $200,000 and you owe $100,000 on your mortgage, you can expect a solid return – not counting the fees you’ll have to pay – on your home sale.
The right home improvement projects can boost your home’s value, increasing the profit you can make on your home. This is key whether you’re selling an investment property or the home in which you live. The more money you make on your home’s sale, the more you have to cover a down payment on your new home, pay for closing costs on a new mortgage or invest.
The Seven Best Home Improvement Projects To Increase Value
1. Replace The Garage Door
Curb appeal matters when you’re selling your home. The more appealing your home’s outside, the greater the chance it makes a good first impression with your buyers. A new garage door can help, especially if your home’s garage faces the street. If buyers see a clean, modern garage door, they might instinctively think that the rest of your home follows suit.
2. Install Manufactured Stone Veneer
A home with stained aluminum siding or peeling paint won’t impress anyone. You can provide an instant boost to your home’s exterior, though, by installing manufactured stone veneer either as your home’s main exterior surface or as an accent piece. As the name suggests, stone veneer is a manmade material designed to look like real stone. It’s a good way to add beauty to your home’s exterior without the higher cost of real stone. In fact, Remodeling magazine's 2020 cost vs. value report ranked manufactured stone veneer as the most cost-effective home renovation. According to the report, installing manufactured stone veneer will bring a return on your investment of 95.6% – tops in the survey -- and will add an average of $8,943 to your home's resale value.
3. Implement A Minor Kitchen Remodel
Buyers focus on kitchens. A modern, airy kitchen can help your home sell faster and for a higher price. Major kitchen remodels, though, are expensive. If your budget is tighter, consider a more limited remodel, perhaps replacing countertops, cabinets and flooring and upgrading to newer energy-efficient appliances. Remodeling magazine ranked the minor kitchen remodel as its third most cost-effective renovation in 2020, bringing an average return of 77.6% when buyers sell.
4. Remodel The Bathroom
The bathroom is another key room when selling your home. Buyers like large, bright bathrooms. You’ll boost your chances of a quick home sale if your bathroom is spacious and features larger tubs or shower spaces. You can make your bathroom more appealing, too, by upgrading vanity countertops, replacing dull lighting and adding modern-looking tile. As with your home’s kitchen, a major bathroom remodel – or adding an entirely new bathroom – can be costly and will generate a lower return on investment. A more modest renovation, though, can add new life to your bathroom and generate a higher return for a far smaller investment.
5. Replace The Siding
Again, you only get one chance to make a first impression with potential home buyers. That’s why you want your home’s exterior surfaces to look clean and inviting. An affordable way to do that is to replace your home’s old aluminum siding with new vinyl or fiber-cement siding. Both options can give your home a clean appearance. If buyers see that your siding is dirty, covered with mold, cracked or damaged, they might wonder if you’ve been lax in caring for your home’s electrical system, appliances, floors and other materials.
6. Upgrade Your Windows
New windows can dramatically lower your home’s energy bill. They can also make your home more comfortable, shielding you from cold drafts during the year’s more frigid months. Home buyers understand this. If you replace old, drafty windows, then, you’ll boost the odds of selling your home quickly and for a higher price. A good upgrade option: Low-E windows – windows manufactured with an insulated glazing. They typically cost about 10% – 15% more than regular windows, according to the U.S. Department of Energy, but can reduce energy loss in your home by 30% – 50%.
7. Add A Wooden Deck
Another way to add resale value to your home is to add a wood deck. A wooden deck can enhance your home’s outdoor space. Potential buyers might look at a deck and imagine themselves hosting barbeques or spending quiet summer evenings in the outdoors with their family. Adding a wooden deck, then, makes it more likely that buyers will make an offer when they’re touring your home.
Best Home Improvement Loans To Pay For Renovations
Paying for major home improvements isn’t cheap. Fortunately, homeowners have plenty of loan options for home improvement projects.
- Personal loan: Homeowners can apply for a personal loan to fund home improvement projects. When you qualify for a personal loan, you’ll receive a single lump sum payment that you can use to pay for improvements. You’ll pay this loan back in monthly installments with interest. There are some potential pitfalls: You’ll need a high enough credit score to qualify for personal loans. And if your credit isn’t strong enough, you’ll be hit with a higher interest rate, which could make your personal loan more expensive.
- Home equity loan: You can also turn to home equity loans to cover the costs of home improvement projects. Your equity is the difference between what you owe on your mortgage and what your home is worth. If your home is worth $200,000 and you owe $100,000 on your mortgage, you have $100,000 of equity. You can borrow against this equity in the form of a home equity loan. Again, you’ll receive a single payment that you pay back every month with interest. The drawback here? If you miss your payments, your lender could take your home through the foreclosure process. Rocket Mortgage® does not offer home equity loans.
- HELOC: Another loan that relies on your equity, a home equity line of credit (HELOC) works like a credit card, with your spending limit based on your equity. Say you have $80,000 in equity. You can take out a HELOC for $60,000. You can then borrow up to $60,000 at any one time to pay for home improvement projects. You’ll pay back what you borrow in monthly payments with interest. You aren’t required, of course, to borrow up to the limit of your HELOC. Be careful, though: As with a home equity loan, if you don’t make your HELOC payments on time, your lender could foreclose on your home. Rocket Mortgage® does not offer HELOCs.
- Cash-out refinance: A cash-out refinance can also help pay for a project. In this type of loan, you refinance your existing mortgage into a new loan, as with any traditional refinance. But you can borrow more than you owe on your current mortgage. Maybe you owe $120,000 on your home loan. You can refinance to a new loan of $180,000. You’d then receive the extra money – $60,000 in this case – as a lump payment that you can spend on home improvement projects. You’ll pay back the total that you borrowed in monthly payments, with interest. The negative here is that you’ll be paying back a larger amount than if you settled for a traditional mortgage.
- Credit card: You can always charge the costs of your home improvement project to your credit card. This is dangerous. Credit cards come with high interest rates, often 19%, 20% or higher. If you don’t pay off your home improvement charges in full each month, you’ll carry a balance and those high interest rates will kick in. Because those rates are so high, this will greatly boost the cost of borrowing.
Home improvement projects can make a big difference in your home’s value and make your home more attractive to buyers. This can result in a quick sale for the best possible price. Remember, though, it’s important to learn what home buyers are looking for in a house when choosing which home improvement projects to take on.