When it comes to tapping into your home equity for an improvement project, will get a good return on your investment. With a kitchen remodel, the answer is yes. According to a report by Remodeling Magazine using 2018 national averages, a minor kitchen remodel delivered an 81% cost recoup for homeowners. When you get into a major kitchen remodel, the ROI went down. Just what is considered a minor remodel? Remodeling Magazine gave this example. Replacing the fronts of cabinets, including new hardware, replacing existing appliances with newer, more energy efficient models, replacing countertops, installing a mid-priced sink and faucet, repainting trim, adding wall covering and removing and replacing resilient flooring. The total cost of the remodel being approximately $20,000 to $25,000. On the other hand, a major kitchen remodel, costing $60,000 or more, will not give you as great a return on your investment.
Using your home's equity to fund a kitchen remodel
When considering a home equity loan to remodel your kitchen, there are a few questions you need to ask yourself. First, how much equity is in your home? Second, how much money do you actually want to spend on your kitchen improvement project? Finally, what is your goal with your remodel? Are you planning on selling the home in a year or two and want to make it more attractive to buyers? Do you just want to upgrade your kitchen and make it more energy efficient? Or, are you finally getting around to designing that dream kitchen you’ve always wanted. Your end goal will be a determining factor in the cost of the kitchen remodel.
If you’re planning on financing your remodel with a home equity loan or home equity line of credit, you need to be sure there is enough equity in your home to fund what you need. Knowing your costs before you begin your project is an important first step in funding your remodel. Plan out everything thoroughly before you begin. You want to be fully aware of costs, so you don’t come up short on cash when your project is nearing completion.
Hire the right kitchen contractor
Interview several qualified contractors to get quotes. Be sure your contractor is licensed and be very specific about exactly what your project entails when speaking to contractors. This includes all work as well as the type and quality of products you’d like used. You want to be sure the quote covers what you really want and doesn’t cost a lot more than you planned on spending. You’ll also want to be sure that the contractor you hire is someone you can work with for the weeks it will take to complete the project. You can save a bit of money on your remodel by keeping windows the same size and using existing plumbing. Tell your contractor to keep these and other cost-saving things in mind. If your planning on a major kitchen remodel, consider hiring a kitchen designer to help you plan it out. The cost may be worth it for initial planning, especially if it’s a large project.
Refrain from over improving your kitchen
What do we mean by that? Don’t put a new $70,000 kitchen in a home that’s valued at $200,000. You should cap your kitchen renovation at about a 10 to 15% of your homes property value, according to the real estate company, Zillow. If your home’s value is $200,000, you’ll want to spend $30,000 or less on your kitchen renovation. If you’re planning on moving soon, you may want to skip any type of costly remodel and opt for just a cosmetic upgrade instead. That will give you the biggest bang for your buck.
A minor remodel can succeed in making your kitchen look much more updated and be much less costly than a project that includes major construction. Although a kitchen remodel is a large project, it could be worth it for you in the long run. Especially if you could recoup most of your renovation cost in the increased value of your home. An updated kitchen can also be a strong selling point when listing your home for sale.
Applying for a home equity loan
If you are moving forward with a kitchen remodel and are interested in a home equity loan to help finance it, be sure to check rates at your local credit union. Spirit Financial Credit Union offers members competitive rates and flexible terms on home equity loans and home equity lines of credit. It’s always smart to shop around for the best rates and to compare fees as well. Interested in learning more about home remodel projects? Read our blog “5 Home Remodel Projects to Beat the Winter Blues.” Check back often for more helpful improvement blogs.