The Accunet Mortgage Show (2/2/20 Episode)
David and Brian talk home remodels: how to get the most “bang for your buck” when remodeling, how to finance a remodeling project, and which remodeling projects actually bring…joy?
This week’s highlights:
- Stock markets are still down due to the coronavirus scare, so mortgage rates remain low.
- National Association of the Remodeling Industry put out an impact report outlining which home remodeling projects have the best return on investment, and which are most worthwhile emotionally.
- We give best practices for financing a home remodel
- A little realty peer pressure could be beneficial when selling an outdated home
Mortgage rates continue to stay low
Low interest rates caused by the coronavirus scare in China have stock values down. Investors continue to pull money out of stocks and reallocate into safe havens, like mortgages.
As of 01/31/2020, Accunet can offer a rate of 3.5% on a 30-year fixed rate mortgage, with 25% equity, $995 in closing costs, and an APR of 3.52%.
According to the Federal Housing Finance Agency, more motivated homebuyers are anticipated moving into 2020.
Which home remodeling projects “spark joy”?
This week, the National Association of the Remodeling Industry (NARI) published its Remodeling Impact Report. Here are the highlights:
- On average, Americans spend $400 billion dollars per year remodeling their homes.
- 35% of homeowners would rather move to another home than remodel.
- 36% of homeowners choose to do the remodeling projects themselves.
Finally, 2,500 homeowners, 4,400 NARI members, and 52,000 realtors were surveyed about the overall cost of home remodeling projects, the return on investment to the overall value of the house once the project was completed, and factored in a “joy score” of how homeowners felt about the finished product:
A kitchen “upgrade” (like installing new countertops or new cabinets — not a complete remodel) had a NARI cost estimate of $38,300, a return on investment (ROI) of $20,000, and a joy score of 9.7.
|Type of Remodel||Cost||ROI||Joy Score|
|A new master bedroom suite||$150,000||$0.50 on the dollar back||8.4|
|A full kitchen remodel||$68,000||59%, or ~$40,000||10|
|A full bathroom renovation||$35,000||$20,000||9.3|
|Adding an additional bathroom||$60,000||50%, or ~$30,000||9.2|
How should you finance a remodeling project?
David advises that for smaller-scale remodeling projects (~$10,000-20,000) homeowners typically use their credit cards.
He also suggests taking out a 2nd mortgage home equity line of credit to fund your remodel. Banks will lend up to 90% of the value of your current home, though he warns against using a 1st mortgage home equity loan, as premiums for FHA loans can become costly.
Taking out a loan on your 401K or life insurance policy are also options, or you can have your home reappraised after your remodel is complete, wherein banks will lend you up to 80% of the as-completed value of your home. David notes that some banks may lend you a remodeling construction loan, but only if you are planning on adding square footage with your remodel.
Accunet Mortgage offers a Refinance Calculator that will show you your savings if you choose to go the refinance route.
Client story: Remodeling “peer pressure”
Brian and David tell the cautionary tale of a client who is reluctant to do any remodeling to a home they are attempting to sell. The occupant loves their home as-is, and doesn’t see its flaws, nor are they willing to make the necessary updates.
Their real estate agent provided them with a ton of comparable sales: Other homes in the area selling quickly…but have updated kitchens, bathrooms, etc. The un-remodeled home basically dated in comparison to the other, refreshed homes in the area.
Brian suggests the homeowner do the remodel projects where they will get the most “bang for their buck” while not breaking the bank: new carpet, fresh paint, stainless steel appliances, or granite countertops. These simple changes will give the home a needed, valuable makeover with relatively low overhead.
Want to estimate how much home you can afford after your down payment? Try Accunet’s How Much Home Can I Afford calculator.
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