Putting in that gourmet kitchen might make your house the most expensive on your block if you try to recoup the cost when you sell. Even expensive renovations don’t always make up for their cost when you put your home on the market. According to Remodeling magazine’s 2021 Cost vs. Value Report, for instance, you are likely to recapture only 57% of what you spend on a major kitchen remodel.2
Do stay open to the possibility of moving to a new home as an alternative.
If, after pricing out your renovation options, you find that the cost — and inconvenience — outweigh the gains, you might consider looking for a house that already has the amenities you want.
Decided to go ahead? Now, how will you pay for the renovation?
With any renovation project, it’s easy to get caught up in the fun decisions — selecting your fixtures, appliances, colors and decor. But before you get too carried away, make sure your finances are in order.
Don’t start without a budget.
A ballpark figure isn’t quite enough — it’s important to establish exactly how much you’re willing to spend. There’s an all-too-common phenomenon known as “scope creep,” in which you add a little of this and a little of that, and before you know it your budget is blown. Knowing (and sticking to) your number will help you determine early on what you can afford — and help prevent disappointment and financial stress later on.
Do research financing options.
If you’re not paying for your renovation with cash you’ve saved, you’ll need to borrow money. A home equity line of credit may be an attractive option, allowing you to pay your expenses as they come up. If you have enough equity in your home and your current mortgage interest rate is higher than rates for a new mortgage, you might also consider a cash-out refinance. If you don’t want to borrow against your home, look into traditional bank loans or credit card promotions, including limited-time, 0% APR financing or reward programs that offer cash back.
How’s your money best spent?
Which is a better use of home improvement dollars — updating a serviceable but somewhat tired kitchen or replacing a houseful of old, drafty windows? When you eventually sell, potential buyers may love a new kitchen, but they’re likely to balk at glaring structural issues.
Don’t underestimate the value of quality structural upgrades.
Redoing your siding may not be as sexy as adding a master bedroom suite, but it can be pretty attractive when it comes time to sell. According to Remodeling’s 2021 Cost vs. Value Report, new siding can recoup 69.4% of the initial cost (on average).2 Not only does it give your house a visible face-lift, but it also makes for a warmer, more energy-efficient home.
Do look for smaller projects that add immediate value.
Consider replacing your front door with a higher-quality version. First impressions matter, and the door is the first thing that friends and neighbors — and potential buyers — notice when they walk into your house. Rather spend your renovation budget elsewhere? Add a fresh coat of paint to the door and buy a new welcome mat.
Do think about what you may need in the future.
Are you planning to stay in your home as you age? Then you might not want your proposed renovation to include additional stairs or a doorway or hall that might not be easily navigable with a wheelchair or walker. Think instead about things like a shower with seating and an anti-slip coating, or kitchen cabinets with pull-up and pull-down shelves.