1. Kitchen Remodeling: The heart of any home, the kitchen, is often considered the most critical area to invest in for a high ROI. A well-designed and modern kitchen can significantly boost your home’s value. According to Remodeling Magazine, a minor kitchen remodel has an average ROI of 72.2%, while a major kitchen remodel has a respectable ROI of 54.9%. Upgrading countertops, cabinets, appliances, and fixtures can revitalize your kitchen and attract potential buyers.

2. Bathroom Renovation: A well-appointed bathroom is another renovation that yields a high return on investment. Homebuyers are often attracted to updated bathrooms with modern fixtures and amenities. According to the same Remodeling Magazine report, a midrange bathroom remodel has an average ROI of 57.1%, while an upscale bathroom remodel has an ROI of 49%. Focusing on enhancements to functionality, aesthetics, and energy efficiency of your bathroom will maximize appeal.
3. Outdoor Improvements: Curb appeal plays a crucial role in creating a favorable first impression for potential buyers. Investing in outdoor improvements can greatly enhance the value of your home. Upgrading your landscaping, adding a deck or patio, or installing outdoor lighting can make your property more appealing. The National Association of Realtors (NAR) states that a well-maintained landscape design can offer an ROI of 100% to 200%.

4. Energy-Efficient Upgrades: In today’s environmentally conscious world, energy efficiency is highly sought after. Upgrading your home with energy-efficient features not only reduces utility bills but also increases its marketability. Installing energy-efficient windows, upgrading insulation, and investing in high-efficiency HVAC systems can yield substantial long-term savings. According to the U.S. Department of Energy, energy-efficient upgrades can save homeowners up to 30% on annual energy costs.

5. Basement Renovation: Transforming an unfinished or underutilized basement into a functional living space can be a wise investment. Adding extra living space, such as a bedroom, home office, or entertainment area, expands the usable square footage of your home and increases its value. The ROI for a basement renovation can vary depending on the region and the extent of the project, but it generally offers a good return on investment.  For those without a basement or in areas of the country where basements are uncommon, other space increases can offer a similar ROI.  Think attic conversions, garage conversions, or even a room addition if your home has sufficient space.

When considering home renovations, it’s important to balance personal preferences with potential ROI. While over time styles and preferences will vary, kitchen remodeling, bathroom renovations, outdoor improvements, energy-efficient upgrades, and basement renovations have consistently shown a solid return on investment.  Before undertaking any major renovation, it’s a good idea to consult with a real estate professional (we know some great ones!) to discuss how renovations could effect the marketability of your home.  In addition, you’ll want to speak with a contractor to understand the project details and costs so you can decide on the best ways to invest in your home.

Did you know?  MasonMac offers renovation financing through our Conventional renovation loan and the FHA 203k program.  We also have HELOCs to access home equity to complete your home projects.  Questions?  You can ask an expert here!

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HELOCs are revolving lines of credit, much like credit cards. You can borrow against your home equity up to a certain limit, upwards of 90% or more of your home’s appraised value, and only pay interest on the amount you use. HELOCs have variable interest rates and can be used for any purpose.

In contrast, HELOANs are lump-sum loans that you receive upfront and pay back over a fixed term with a fixed interest rate. You can borrow against your home equity, and the amount you can borrow depends on your home’s appraised value and creditworthiness. HELOANs are often used for significant expenses like home renovations or medical bills.

When considering whether to take out a HELOC or HELOAN, there are some crucial differences to keep in mind. Repayment terms for a HELOC allow you to pay back what you use and can last for 10-20 years. HELOCs often have an introductory interest-only repayment period, often 10 years (followed by a repayment period of 20 years).  On the other hand, HELOANs are paid back over a fixed term, typically 10-30 years. Interest rates for HELOCs are usually variable, while HELOANs most often have a fixed interest rate.

In terms of flexibility, HELOCs are the better option. You can borrow and repay as needed, up to the maximum credit limit, and can reuse the line of credit over time, typically for the first 10 years. This makes HELOCs ideal for homeowners with ongoing or unpredictable expenses. HELOANs may be better suited for homeowners with a specific, one-time expense in mind.

When it comes to closing costs, HELOCs usually have lower costs, as you only pay for what you borrow. HELOANs may have slightly higher closing costs as you borrow a lump sum upfront. Both options come with some risk, such as the risk of increasing interest rates with HELOCs or larger fixed monthly payments with HELOANs.

Deciding between HELOC vs HELOAN always depends on your unique financial situation and goals. If you need ongoing access to cash or have unpredictable expenses, a HELOC may be the better choice. For a specific, one-time expense, a HELOAN may be more suitable. Understanding the differences between the two can help you make an informed decision.

MasonMac loan officers have the experience to help you navigate the two options and determine which may be right for you.  Give us a call to learn more, or you can always reach out for a quick response by asking a question here.

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If you need to access cash from your home equity and have no interest in selling, in most cases you’re left with limited options to tap into the equity you’ve likely grown over the past few years of high appreciation.  It often boils down to a HELOC VS Refinance.  There are some definite benefits and drawbacks to both options so it’s important to know the ins and outs so you can make a smart financial decision that offers the most benefits short and long term.  Let’s start with the HELOC!

HELOCs

HELOCs are Home Equity Lines of Credit.  They act similarly to a credit card, in that you have a limit (based on the amount of equity in your home), and can access the line of credit to draw funds in either a lump sum, or as needed, during a “draw period”.  Most HELOCs are structured as 30 year loans, with an initial 10 year “draw period” where you can access the cash from your home, followed by a 20 year repayment period in which no more cash can be taken out and the withdrawn funds must be repaid.  During the draw period, most HELOCs offer interest-only payment options.

The plus side of this payment option is that it allows for lower monthly payments so you can borrow the money you need for things like debt consolidation, home renovations, or anything else, without making too large of an impact to your monthly budget.  Another perk of HELOC products is they often have lower closing costs than a full refinance, but many times they will be accompanied by a small annual fee (again, similar to many credit cards).

The HELOC is not without it’s downside.  Since HELOCs tend to be based on the prime rate, the interest rate is often variable based on what the Fed does to the Fed funds rate.  Unlike first mortgage rates, HELOC rates vary, sometimes frequently, so payment amounts aren’t fixed and can be unpredictable year over year.  Another downside that’s not often considered is that if you want to refinance your first mortgage in the future and you have a HELOC, most times your new refinance rate will be higher as there’s a penalty for having a 1st and 2nd lien, but also a penalty for “cash out” if you’re consolidating a HELOC that wasn’t used to purchase your home.

So while HELOCs may be a more affordable option up front, they could prove more costly long term in the event rates rise, and they’ll make future refinances (to take advantage of lowering rates) more expensive

Refinance

A refinance is a restructuring of an existing mortgage lien, in which a new loan replaces the existing loan.  With a cash out refinance (often referred to as an “equity loan”), borrowers may restructure their existing debt and borrower additional funds from the equity in their home as well.  A refinance can also be used to simply reduce an existing interest rate or change the term of a loan (for example, from a 30 year to a 15 year loan term).  When no additional cash is borrowed, or only a very small amount, it’s called a “rate/term refinance”, or “no cash out refinance”.

The perks of a refinance to take cash out will depend on the situation, but fixed rates are available so a borrower knows what their payment will be today, 6 months from now, and for years to come.  This offers more long term planning without having to worry about rates or the overall mortgage market in terms of the effect on monthly payment and finances.  A refinance may also offer the possibility for more cash out, and is available on various property types and ownership situations (for example, HELOCs aren’t widely available in investment properties, but investment property owners frequently borrow against their equity with refinances).  In a falling rate environment, refinancing can sometimes offer customers cash without impacting their monthly expenses!  For example, on a $400,000 mortgage at 5.5%, the monthly payment is close to the same as a $500,000 mortgage at 3.5%, so in a falling rate environment, a refinance can offer cash without negatively impacting your budget!.

The downside of a refinance is that if you currently have a very low interest rate, increasing it by much to access cash may be a tough pill to swallow.  It can make sense when paying off higher rate consumer debt, but whether it’s worth it depends on overall savings.  Refinance closing costs tend to be higher than HELOC closing costs, too, sometimes by a few thousand dollars.

When it comes to the HELOC VS Refinance debate, everyone’s situation is different and since both products offer different short and long term benefits and pitfalls, it’s really important to talk with an expert about the available options.  Our MasonMac loan officers are here and ready to help you decide – when it comes to HELOC vs Refinance, what’s right for you?

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