Here are reasons for renovating as well as payment options commonly used by homeowners.1
Since the onset of the COVID-19 pandemic, Americans have caught the remodeling bug. According to the National Association of REALTORS® (NAR) Remodeling Impact report, U.S. homeowners spent approximately $420 billion on home improvement projects in 2020.2
Homeowners typically remodeled for three reasons: to upgrade outdated or worn-out finishes, materials, and surfaces; to add features that improve livability; and to create a fresher look and feel to their homes.
Of course, renovations can also boost a property’s value. NAR’s Remodeling Impact report estimated the dollar value a project would add to a home during resale. In comparing that dollar value to the estimated cost of each job provided by members of the National Association of the Remodeling Industry, a recovered project cost percentage was tabulated. For interior work, the most cost recovered was from refinishing hardwood floors (147%). Other top projects were new wood flooring (118%), an insulation upgrade (100%), new roofing (100%), and a replacement garage door (100%).
How to finance a renovation during inflation
While paying cash for a home renovation is ideal, this is not a viable option for many homeowners. Fortunately, there are ways to finance a remodeling project:
- Home equity line of credit (or HELOC). Here is how this option works: A homeowner accesses cash based on the value of their property and then pays back the borrowed amount along with interest. HELOCs have variable interest rates, which adjust based on market conditions.
- Home equity loan. Also known as a second mortgage, a home equity loan enables a homeowner to borrow money by leveraging the equity in their property. The loan amount is dispersed in one lump sum and paid back in monthly installments.
- Credit card. During high inflation, credit card interest rates often rise, so financing a major home renovation with this method may not be a good idea. However, cards that offer an introductory interest-free period give homeowners who are diligent with their payments an affordable short-term financing option.
For minor renovations, the do-it-yourself approach can save money. Painting, replacing lighting fixtures, or refreshing landscaping not only adds value but delivers pride and satisfaction to owners who successfully complete a task.
Here is hoping your renovation project stays on time and on budget!
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