Let’s say you are planning to update your kitchen and/or bathrooms. One of the things to consider is financing your remodel. Sure, you could pay cash, as some of our clients do. Others use a Home Equity Line Of Credit (HELOC).
Financing Your Remodel – HELOC
A HELOC uses the equity in your home as collateral. Let’s say your home is worth $500,000 and your mortgage balance is $250,000. That would mean the equity in your home is $250,000. Depending upon your credit score and other considerations, you may be able to borrow against a portion of your home’s equity.
At the time we wrote this blog, the HELOC interest rates from Bozeman banks and credit unions ranged from 4.9% – 7%. There were also ranges of how much you need to borrow, or draw, immediately. This was from $0 to $50,000.
Another consideration is whether or not to delay the purchase of a new vehicle and, instead, undertake a remodeling project. Here are some of our thoughts:
Buy a Car or Remodel?
According to Kelley Blue Book, The average 2019 price for a “light vehicle” in the US is $36,843. According to Southern Living and Houz, the average kitchen remodel was $11,000 and, according to HomeGuide.com the average US bathroom remodel is $8,858. So, for the price of an average car one could perform average remodels on a kitchen and two bathrooms.
Now, if you need to buy another car, by all means, do that. If another car is a “nice to have”, here are some things to consider.
Financing Your Remodel – Home Value Increase
According to HomeGuides, kitchen and bathroom remodels will increase your home’s value by any where from 57.2% and 69% of the remodel’s cost. Also, you, your family, and your guests will be able to enjoy your new kitchen and bathroom for about 20 years, which is the average lifespan of a remodel.
As we all know, a new automobile depreciates as soon as you drive it off of the lot. According to Kelley Blue Book, and automobile’s value depreciates 20% the first year and a total of 60% at the end of year five. As we’ve mentioned above, a remodel increases your home’s value.
If you would like to discuss a remodeling project, give us a call – We Love To Talk (and listen, too)!