Spring is in the air—time for flowers, warm weather, and turning your home improvement dreams into reality. Maybe this is the year to bring your dream kitchen to life, transform your bath into a luxury spa, or make your home smarter, greener, and more accessible. Although Flagstar can’t weigh in on color schemes or appliances, we can offer some financial tips for your next house project.
Enjoying your home vs. recouping project costs
Home improvements serve two purposes: They enhance your everyday life and potentially increase the value of your home. To see how your project stacks up in either category, check out the Remodeling Impact Report from the National Association of Realtors®. It shows which project offers the best bang for the buck, both financially and based on homeowner satisfaction. What project took the top spot? Refinishing hardwood floors scored a whopping 147% for cost recovery and 10 out of 10 for satisfaction. Impressive!
Here's what to consider before starting your home improvement project:
- How long do you plan to stay in the home? If it’s 5 years or more, prioritize your wants and needs because you’ll have more time to enjoy the upgrades. If you plan to sell sooner, focus on changes with broader appeal to maximize your return.
- Will the upgrades make your everyday life better? Some changes dramatically improve the quality of life, even if they don't offer the highest financial return. For a large family, a second bathroom could be a game-changer and make hectic mornings more manageable.
- Is the change essential? Necessary home repairs, like a broken furnace or plumbing issues, are not exciting, but they take precedence over cosmetic changes. Not fixing these problems could cause additional damage, stress, and expense later.
- What is the value of the upgrade? If you never plan to move, customize your home to your heart's content. But if you want to recoup costs, talk to a real estate professional about what local buyers are willing to pay for. Features like swimming pools, wine cellars, and voice-activated ovens don't always translate to higher resale values.
How to pay for home upgrades
What’s the best way to pay for your project? Let’s look at various options so you can decide which one is right for you. And remember, home improvements are notorious for taking longer and costing more than originally planned, so pad your timeline and your budget by 15-20%.
- Good old-fashioned cash: Paying cash lowers your overall costs because you won’t have to pay interest. Just make sure the project doesn’t drain your savings, and there’s enough left to cover an emergency. To lower your risk, do the project in stages instead of all at once.
- Home equity line of credit: A HELOC is a second mortgage that you use as needed. As you repay the funds, they become available to you again, like a credit card, but a HELOC usually has a lower interest rate, which keeps costs down. Learn more about HELOCs here: Flagstar HELOCs.
- Cash-out refinance: You can refinance your current mortgage and take out some of the equity you’ve built up. This could be a good option if the new mortgage offers a lower interest rate than your current one and you plan to stay in the home long enough to recoup the closing costs.
- Personal loan: If your home doesn’t have enough equity yet, you can finance your project with a personal loan. However, personal loans often have a higher interest rate than the other options.
- Credit card: This is tricky territory. Consider using a card for small projects only if you pay it off quickly or have a 0% APR introductory rate and pay it off before the rate changes. We don’t want you to pay 22% interest for a house project that wasn’t paid off in time. (See our latest credit card offers here: Flagstar Visa Credit Cards.)
