Some home improvement projects are small enough to front the cost yourself, but many large projects can be worth taking out a home equity loan. The interest rates are lower than putting an unpaid balance on a credit card.
When Capital One asked me to write a post for them about home equity loans in October, I got to thinking about what type of projects I’d want to take a loan out for vs. paying up front in cash.
This is largely a personal decision that is GREATLY influenced by what type of cash flow and savings you have, but I think it’s safe to say that many expensive projects are worth taking out a home equity loan to complete. They can have lower interest rates than your credit card which means less money getting flushed down the high interest rate toilet.
Personally, I love shuffling money so I can pay the lower interest rate so I also love the idea of loan consolidation through a home equity loan. Capital One allows you to take out a home equity loan to pay off other high interest debt and as of October 3, 2016, Capital One’s APR on home equity loans was 4.26%.
Don’t forget to check out my other post, Tips for Saving Money on Major Home Improvements.
Project #1: Kitchen Renovations
Kitchen Renovations can cost a lot of money, depending on the extent of your project and the size of your kitchen. In our condo a wayyyyyy long time ago, I decided to rip out the cabinets, replace the flooring, lighting, and- out of necessity- replaced the appliances. The electric bill was SO much better after the replacements… by a lot.
The kitchen alone for this project cost us $7500 or so, not including the updated appliances. I think we may have bought some of the supplies like the faucet separate too.
Was it worth it? Sometimes I wish we’d DIY’ed this project, based on my experience now with cabinet installation. Saving money would have been nice. But the project meant selling our condo that had been on and off the market for a couple of years.
Project 2: Expensive Repairs for Safety Reasons
So. It seems like expensive repairs like to pop up at odd times for homes. My condo is a really good example. The home we own now was a new build so we’ve had fewer surprises. Repairs for safety reasons are absolutely worth taking out a home equity loan to complete immediately. Having a fancy kitchen is fun, but not necessary. But replacing a broken furnace or doing work on a fireplace that has issues that could lead to a fire? Do it. Fixing black mold that’s in your home? Waterproofing your basement to prevent the mold to begin with? All really important repairs that can be costly, but are NECESSARY to your family’s safety.
Here’s the nice pellet stove that came with my 1986 condo when I bought it in 2006. When we went to sell the condo, we discovered that we were living with a fire hazard due to however this pellet stove was setup. Surprise! Fortunately, the repair guy was awesome. I can’t recall what we did- if it was fixed or if the buyer agreed we could just take it out.
Oh yeah… and if you think that was the only narrowly avoided fire hazard in my condo, you’d be wrong. We opened a ceiling in the bathroom, discovered an entire missing 4′ portion of ventilation from the dryer to the house exterior.. just MISSING. So we had to fix that. And the man above us had a fault in his outdoor light that caused a major fire. It required fire trucks from several counties to put out (and we were all evacuated during the process, naturally).
Realistically, you may discover fire and other types of hazards in your home and it’s important to fix those issues before they hurt someone.
Project 3: Projects for Energy Savings
The original appliances in my condo were all from 1986. I SLOWLY replaced them all (single broke social worker at the time). I have to admit, they don’t make them like they used to. Those things were in it for the long haul. But I have an original water heater, furnace, kitchen appliances, and a washer/dryer combo that were happily chugging along. The only thing that actually broke… ruining all my food (sigh)… was my refrigerator. Immediately after I bought the condo of course.
I think I should’ve invested in some of these appliances sooner. Some months my electric bills were $500, particularly in the winter. We lived in the bottom condo and the master bedroom was under the deck of the person above us. Per a neighbor, there doesn’t appear to be insulation in the ceilings between the master bedroom and the decks. I mean…. I didn’t open my ceiling to check, but he had his done. He ended up having someone blow insulation in through a small hole. It apparently was helpful for his electric bills. We had the original windows too. Every appliance update and fix to the condo helped improve the electric bill. We never replaced the windows so there was still room for improvement, but I got the bill down to $150-250/month most months by the time I left.
Speaking of solar panels, those would be a great investment option to use a home equity loan for. Or a geothermal system. The long term savings on the systems can be worth taking out a home equity loan to get them installed- particularly if you have super high heating or electric bills. If you have oil heating, I’d definitely look into geothermal. And if it’s costing you $500/month for oil, then you really should consider doing the home equity loan sooner rather than later… if you want to run some quick numbers to determine if it will save you money, check out Capital One’s Home Equity Loan calculators and other tools.
Project 4: Finishing or Adding a Room
One of the big worthwhile projects… at least in my mind… is finishing a basement. We LOVE our finished basement. It’s an awesome playroom and office. Most of it was finished when we purchased our home, but there were two storage rooms that were unfinished. We decided to finish one of them. It is now our office area and eventually we’d like to move the kids’ stuff out into the other portion of the basement and keep it just as a “man cave.”
The work to get the room finished- without the flooring- was a little over $5000. We put the cabinets and flooring in ourselves to save money.
My dream project… and one we hope to accomplish at some point… is a sunroom. Or a greenhouse. Or something warm and cozy and a place where I can keep some plants. I keep trying to think of ways to DIY it, but I’m a bit at a loss…. if you have any ideas, leave me a comment.
Project 5: Bathroom Updates
Bathrooms don’t have to be huge projects, but updating them can add to your home’s value by a LOT. This update to my master bathroom in our condo cost about $3600, but it helped sell the condo when we went to list it. And it made me happy for a long time before that.
Project 6: Outdoors and Landscaping Projects
Ahhhhh. This is lot of projects lumped into one category. Decks, fencing, landscaping and sheds all cost a lot of money. If you needed to do a major overhaul, a home equity loan might make sense. Just getting a landscaping plan drawn up for us would cost around $1000. We have considered it because I probably need a little guidance to bring everything in the yard together.
So far we’ve installed a shed (purchased), a duck house and attached run, a deck, privacy fencing, added rock around the exterior foundation, and added a path from our front to the back of the house. And naturally, gardens.
I’ll be posting about our huge wood/lattice privacy planters in the spring, but I also hope to build raised beds along our fencing to add plants and more privacy to the yard.
Honestly, we’ve tackled all of these projects little by little by saving up the money and doing them as we can afford them. A home equity loan would have been a nice option to complete a bunch of work all at once (although we didn’t have any equity when we initially purchased the home).
Whether you’re remodeling or consolidating debt, Capital One offers services and tools to help you find the right option for your situation. Visit Capital One’s Home Equity Tools to get a customized rate offer and estimated loan amount with no impact to your credit score. You can even begin the application process online– it’s simple and there’s no application fee or closing costs.
Want to work out your options with a person? You can call Capital One at 855-446-9656 or stop by any Capital One branch location for more information and to get started today.
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I was selected for this opportunity as a member of CLEVER and the content and opinions expressed here are all my own.