Highest Valued Spaces  

When talking to homeowners, I often get the question, "When remodeling, what will be my biggest return on investment?" Unfortunately, the answer isn't always cut and dry. In terms of Return on Investment (ROI), there are many variables to consider.

1. Location. If your home sits on one of the larger lots in the neighborhood yet is one of the smallest homes, you are a prime candidate for renovating your home; typically, these homes see the largest returns on investment. Also, because real estate is local (i.e., your neighborhood), the ROI you'll see is further dictated by what your neighbors have done to improve their living spaces.
2. More Space. When it comes time to sell your home, a few spaces are usually most valued to buyers, including bathrooms and bedrooms. The more you have, the better. Additions and finished basements are other high-value spaces as well.
3. Updated Space & Floor Plans. Updating your floor plans to meet the desired open room-to-room flow of today's modern homes adds great value to your home, as does updating your fixtures, finishes and furnishings. One hot value is always a modern kitchen - complete with upgraded flooring, cabinetry, countertops and new appliances.

Finally, keep in mind ROI versus ROE. Undertaking a remodeling project shouldn't only be based on ROI. It should also be focused on Return on Enjoyment (ROE). This is where the highest value spaces may not be limited to just dollars and cents, but the true value - the ROE - is found in the decision to stay and remodel an existing home instead of moving. Families choose to do so because they love their neighborhood and community, and they like the proximity to work, school and shopping centers. Therefore, the highest value can't be found in space inside your home - but in the lifestyle you are keeping.

Financing Your Remodel Project

By Paul Fazzini, Sales Manager at Graystone Mortgage 

EGS Note: You've been dreaming of remodeling your kitchen, adding an addition or finishing your basement, but for many homeowners, the roadblock is often figuring out how to pay for it. That's why we've asked Paul Fazzini of Graystone Mortgage to give our readers some guidance in how they can finance their remodeling projects.

Traditionally, homeowners have three options for financing a remodeling project:

1. Home Equity Loan
2. Cash-Out Refinance
3. Construction Remodel or Renovation Loan

Home Equity Loan

This is the first option most homeowners think of when they decide to remodel their home. Why? Because it is probably the easiest and fastest approach to getting the money you need for improvements you want. Also, once your home equity line of credit is established, you can withdraw the money when you want it - and only pay interest on the money you withdraw.

One of the drawbacks of this form of financing, though, is that typically, the interest rate will fluctuate and is usually higher than your mortgage interest rate. Additionally, you are now responsible for making two mortgage payments instead of one (one for your primary mortgage and a second on your Home Equity Loan).

Cash-Out Refinance Loan

With this loan, you refinance your existing mortgage AND include additional funds in the loan to finance the remodeling project you have in mind. The bank rolls in your current mortgage into a new loan and then gives you the cash for the balance of the loan. As with your original mortgage, this loan is one monthly payment. This may be a good option for many homeowners, especially in today's low interest rate environment. 

However, a few drawbacks do exist with this loan setup. First, when you refinance, you are taking out a lump-sum that will accrue interest and require mortgage payments immediately. This means that you could be paying mortgage and interest before the remodeling project is complete - or even started. Another drawback is that you are locked into the amount of cash you requested for home improvements. If the project costs less, you can pay back the unused amount, but if the project ends up costing more, you can't get more money.

Construction Rehab Loan

This loan is designed for remodeling projects that are more than just cosmetic. Projects like kitchens, additions and basements are ideal candidates for this type of loan because this is a refinance loan that is treated like a construction loan. Just like with the Cash-Out Refinance, at settlement the bank pays off your first mortgage, but additionally, a "draw" schedule will be set up for paying the remodeler for your home improvements.

There are several advantages to this type of loan. First, because there is a "draw" schedule, you are only paying interest on the draws that you've taken thus far - and not on the total amount until the project is completed. Additionally, this loan takes into consideration the future value of your property, after the home is renovated - which means you may be able to tap into a larger pool of money to finance the project, and not just the equity you currently have in your home.

One drawback with this loan is that additional fees are included - from the appraisal of the home and the inspections during construction. However, for many homeowners, this is also viewed as an advantage, because they are getting the benefit of an appraiser reviewing the project and ensuring that the project is completed to the pre-determined draw schedule.

Finally, I'd be remiss if I didn't mention a fourth option of financing your remodeling project: with cash on hand. With this option, the question becomes whether or not it makes sense to use your cash to finance a remodeling project, or if the better option is to lock in a low-interest loan. This assumes that over the life of the loan, the money you would have used to finance the project will more than likely earn more than the cost of the mortgage. If you are entertaining this option, I recommend you consult with your financial advisor first to determine if this is the best course of action for you.

No matter which option you choose, it is wise to build in a financial "cushion" that exceeds what the project was estimated for. This allows you to upgrade options (like flooring or cabinetry) as the project moves along, if you choose.

Finally, tax advantages exist with all three loan options, so be sure to consult with your accountant to get guidance as to which option is the best for you.

Are you ready to begin your one-of-a-kind project? Start here >> 

About Graystone Mortgage

Many homeowners are opting for fiberglass exterior doors because they hold the beauty of wooden doors, but don't rot or warp in wet conditions, like wood does. However, fiberglass doors aren't completely maintenance free.

In Central PA, we enjoy a wide range of weather - from the cold winters of Minnesota to the sunny and warm summers of Florida - and this can be a real challenge to our buildings. They will expand and contract significantly in a matter of 12 months, and yes, our exterior fiberglass doors can really take a beating - especially in the summer months when the UV rays are at their strongest.

Routine maintenance is crucial, so to avoid a painful repair or restoration job in the future. Make sure you follow the manufacturer's instructions for maintenance to keep your door looking beautiful - and sealing your home from the outside elements - for many more years to come.

Our purpose for bringing you The Construction Connection is to share our wisdom. We have seen it all and yet there is so much more to learn every day.

For nearly 45 years the divisions of EGStoltzfus (Neighborhoods, Designed Homes & Remodeling, Commercial Construction and Handyman) have been Building Better and Creating Value for more than 7,000 property owners. The collective wisdom of our team is the key to a predictable outcome for each and every project.

In this forum we will be reaching out to offer specific how-to's for caring for your property and improving what you have, as well as suggestions as to what to do when it's time to start anew. Additionally, we will provide you with information on market conditions, technology updates, codes and legal concerns, design trends and many more topics we feel can connect all our readers to Better Value.

The team of EGStoltzfus Homes is always available to answer your questions and advise you through a remodel or new home construction project.

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