Home improvement projects come in all shapes and sizes. As homeowners determine which upgrades should be at the top of their to-do list this summer, it may be helpful to distinguish between what would be nice and what’s critical.
While you’re at it, consider these tips for approaching and financing home improvements.
Tackle timeliest projects first
If your to-do list includes weather-related projects, such as getting your furnace repaired or replaced, it makes sense to address them before winter arrives and pushes up the demand for such services.
Similarly, if you see signs that your hot-water heater is starting to fail, why run it to death? It may burst just before a holiday weekend and your family would be taking cold showers until a costly repair or replacement.
So prioritize your projects before taking them on.
Get advice and estimates
Many renovations will raise the value of your home. If that’s your primary motive, you may want to consult a real estate agent to find out which projects tend to be beneficial for a resale.
Labor typically makes up a significant chunk of costs. You could save a bundle if you do the work yourself. But relatively few people have the time and expertise, for example, to re-wire an electrical system or knock down interior walls, so they turn to local contractors or handymen.
Before soliciting estimates, research potential contractors’ reputations and track records by checking their licensing and business records as well as consumer complaints filed with the state attorney general’s office or the Better Business Bureau. You may also ask for client references from those who submit bids for your projects.
Consider ways to finance repairs
A common way to pay for expensive renovations or repairs is by borrowing against the equity in your home, either in the form of a loan or a line of credit.
The former delivers a lump sum you must repay over a set period of time at an agreed-upon interest rate. The latter, also known as a HELOC, provides a pre-approved spending limit that, like a credit card, you can pull money from as warranted.
HELOCs usually come with a variable interest rate, so your monthly payments will change depending on the amount borrowed and the interest rate in effect then. HELOCs also have set terms, at the end of which you must pay off the amount borrowed.
Another option to free up cash is to refinance your mortgage, especially if you can obtain a significantly lower interest rate. This does involve additional expenses, though, including origination and appraisal fees.
If you shop for these loans, remember that credit unions such as Camino Federal Credit Union tend to offer lower rates and fees than traditional banks. That’s because credit unions channel their profits back into the business.
Finally, when weighing projects, it usually makes sense to focus on critical maintenance first. You can always get to the luxuries later.
Peter Lewis, NerdWallet
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