Buying a home may be a dream, but the initial purchase is only
the introduction to that dream. There's always something about your house that could
be a little better, a little closer to perfect. Now, with a little planning, you
can bring your home closer to your dream of perfection.
Reasoning Your Redo
Many home improvement projects begin with someone in the household
saying, "Wouldn't it be nice ...?" What follows may be a wish for a remodelled kitchen
or a room addition with space to accommodate every family member's needs. However,
reality usually intrudes upon this daydream: There's only so much money and so much
space. The trick is turning your dreams into reality. Start by evaluating your needs.
Most homeowners consider home improvements for one of these reasons.
- You need to update the out-of-date. If your kitchen still
sports appliances and decor from decades past, now may be the time to make it current.
- You need to replace fixtures or appliances. Sometimes a
home improvement project grows out of an immediate need to replace broken or inefficient
fixtures. If the sink, tub or toilet has to be replaced, many people take the opportunity
to refurbish the entire bathroom.
- You're selling your home. You want to be sure you'll get
top dollar from the sale of your home, and that may be the rallying cry for some
home improvement projects.
- You're staying put. You thought about moving, but now you
realize that improving your present home is a better option.
- Your family has grown and you need more space.
Improving to Move or Improving to Stay
You need to evaluate your plans carefully if you're improving
your home to put it on the market. Cutting corners could hurt rather than help your
prospects, but you don't want to go overboard either. Potential buyers may not want
to pay for the extras you have included, such as a hot tub or pool. It's best to
keep changes simple.
Also keep in mind that people viewing your house may not share
your tastes and therefore won't necessarily appreciate the time and effort you put
into finding just the right shade of green paint for the walls.
Improving to sell is easier if you mentally put yourself on
the other side of the proverbial fence: What is important to the home buyer? Here's
a list of remodeling projects that buyers are likely to find valuable:
- Adding or remodeling a bath
- Improving the kitchen
- Adding a new room
- Adding a bedroom
- Adding or enclosing a garage
If you're remodeling in order to stay in your home, you still
need to avoid over improving it. You'll probably sell someday, and even if your
house is the best on the block, you may have a hard time convincing buyers to pay
extra for the things you found so important. Keep the value of other homes in the
area in mind whenever you consider improvements. Your home's value should be no
more than 20% above the average. That means a $10,000 kitchen improvement project
might be a better idea than a $10,000 hot tub, especially if no other homes in your
area have hot tubs.
Unfortunately, some home improvement projects get started because
something is broken. A leaky plumbing fixture may be the first step to a major bath
remodeling. After all, if the tub has to be replaced, why not do the whole room?
While that's certainly one reason to remodel, you'll generally
want to avoid basing your home improvement projects on immediate need. Proper maintenance
will help to minimize problems. Go over every part of your home at least once a
year. Check out the roof, plumbing, electrical wiring, etc. As soon as you notice
a problem, fix it. Early attention to repairs will help you avoid a larger expense
later on. Remember maintenance does not add to the value of your home. Repairs,
generally, are not improvements but necessities.
Let's face it, home projects can be expensive. You may be tempted
to tackle them yourself as a way to save money. For small projects, that may be
a smart move. You don't have to wait for someone else to fit your house into their
schedule, and you can take pride in doing the work yourself. Unless you're particularly
handy, however, large home improvement projects are better left to the pros. If
you're remodeling the kitchen, ask yourself if you can handle the plumbing, electrical
and carpentry work. And don't forget that you need to finish it all quickly, because
in the meantime you'll be without a kitchen and eating out can be costly. Keep in
mind, do-it-yourself jobs generally take more time and you're responsible for obtaining
the necessary permits and inspections.
Hiring people who have experience can save you money and time,
too. For example, these professionals can help you get a custom look using stock
products, and that can be a significant savings. Getting something done right--the
first time--will give you value that lasts for years.
Word-of-mouth is a good way to start looking for home improvement
specialists. Check with friends, business associates and neighbors for recommendations.
Always ask for at least three references - and check them out. Check, too, with
your local chapter of the Better Business Bureau or Chamber of Commerce. You can
find the number in the community services section of your telephone book. Make sure
everyone is in agreement about design, schedule and budget. Get the details down
in writing in a signed contract. You'd also be wise to check on professional certifications
and licenses, where required, and insist that any contractors you hire are fully
insured and bonded. Contact your town or city Building Department for information.
In particular, make sure contractors carry workers' compensation insurance so that
if any workers are injured on the job, you won't be held liable. Ask for a copy
of their insurance certificates. Also make sure that you or the contractor secure
any necessary permits before beginning the work. Contact your local Planning and
Zoning Commission for information.
Here's a quick overview of some of the pros you may work with
in remodeling your home:
Architect: These professionals design homes or additions
from the foundation to the roof. If you're planning structural changes--adding or
taking out walls, for example--or anticipate a complex design, you'll probably want
an architect. You may pay an hourly fee or a flat fee. Be sure to get an estimate
of the total cost: It can take 80 hours or more to draw up plans for a major remodeling
Contractor: This person oversees the nuts-and-bolts
aspects of your home improvement project, such as hiring and supervising workers,
getting permits, making sure inspections are done as needed and providing insurance
for work crews. You may wish to get proposals from one or more reputable contractors,
based on specific details of your project. Be sure each contractor bids on exactly
the same plan for comparison purposes. Once you've chosen a contractor, make sure
your contract specifies that you will pay in several stages. It's customary to pay
one third when the contract is signed so that the contractor can buy supplies. The
number and timing of other payments depends on the size of the job, but do not make
final payment until all work is successfully completed, inspected and approved.
Interior Designers: These specialists offer advice on
furnishings, wall coverings, colors, styles and more. They can help save you time
(by narrowing down selections) and money (from the professional discounts they might
receive). When meeting with an interior designer, be sure to talk about your personal
style and preferences. Expect to pay anywhere from $50 to $150 per hour, or you
may negotiate a flat fee of perhaps 25% of the total project cost.
Depending on the scope of your home improvement plans, finding
funding may be a project itself. If the project is small, you may be able to save
for it from your regular household budget. For larger projects, you'll probably
need to borrow money. If you participate in a 401(k) or 403(b) plan at work, you
may be able to get a short-term loan from your account. To find out if this option
is available to you and to learn about any tax implications, talk to your benefits
administrator. Another possibility is borrowing against the cash value of your life
insurance policy. If you're interested in finding out more about this type of loan,
talk to your life insurance agent.
To take out other types of home improvement loans, head to
your local bank, savings and loan, or credit union. Compare interest rates, repayment
options and penalties from lending institutions before deciding on one of the following
Second mortgage: This is a loan against the equity in
your home. It is, in essence, an additional mortgage. Typically, financial institutions
will let you borrow up to 80 percent of the appraised value of your home, minus
the balance on your original mortgage. For example, if your home is appraised at
$100,000 and your current mortgage balance is $70,000, you may be able to borrow
$10,000 by way of a second mortgage. You may also incur all the fees normally associated
with a mortgage - closing costs, title insurance and processing fees. Talk to your
tax advisor about whether the interest on a second mortgage may be tax-deductible.
Refinancing: This involves paying off your old loan
and taking out a new mortgage on your home. To refinance, generally you'll need
to have equity in your home, a solid credit rating and a steady income. You'll incur
all the closing costs that go along with getting a new mortgage, so unless you're
doing extensive remodeling and can get a mortgage interest rate at least two points
less than you're currently paying, this type of loan may not be for you.
Home Equity Line of Credit: Like a second mortgage,
a home equity loan lets you tap up to about 80 percent of the appraised value of
your home, minus your current mortgage balance. Since it's set up as a line of credit,
you won't be charged interest until you make a withdrawal, but you will have to
pay closing costs. You can make withdrawals gradually as you start paying contractors
and suppliers. The interest rate charged is usually variable and may be based on
the outstanding balance. Make sure you understand the terms of the loan. If, for
example, your loan stipulates that you need to pay interest only for the life of
the loan, you'll have to pay back the full amount borrowed at the end of the loan
period or you could lose your home. The interest on home equity loans may be deductible;
talk to your tax advisor.
Unsecured Loan: Although the interest rates charged
are often higher and you generally will not be able to get a tax deduction for the
interest paid, the costs of obtaining an unsecured loan are usually lower. The relative
ease of obtaining this type of loan makes it popular for small projects costing
$10,000 or less. The lender will evaluate your application based on credit history
Be House Smart: You'll be happiest with the outcome
of a home improvement project if you plan carefully and do your homework. Armed
with the information in this pamphlet and a realistic idea of your needs and budget,
you'll find your home getting closer to your dream of perfection.