Kitchen & Bathroom Renovations | How to Pay for Them
There are many popular home renovations (kitchen and bathroom renovations are the most popular) that can add value to your home. If you are considering a home renovation, it is important to factor in the cost and how you will pay for the project. Whether you are looking to renovate for yourself or because you are thinking about selling your home, it’s important to understand the costs and benefits you are likely to see.
Most home renovations fall into one of three categories: kitchen, bathroom, or other.
Kitchens
Kitchen renovations are often the most expensive home project, with the average cost coming in at around $15,000. This is due to the fact that there are so many different elements involved in a kitchen renovation. From new countertops and appliances to painting and flooring, there are a lot of different ways you can go about renovating your kitchen.
From an investment perspective, kitchen renovations typically see a 86% return on investment (ROI) when the home is sold. This means that if you spend $15,000 on a kitchen renovation, you can expect to see $12,900 in added value to your home.
Bathrooms
Bathroom renovations are the second most popular home renovation, with an average cost of around $10,000. Like kitchens, there are many different elements that can be involved in a bathroom renovation. From new fixtures and tile to painting and flooring, there are a lot of different ways you can update your bathroom.
From an investment perspective, bathroom renovations typically see a 70% return on investment (ROI) when the home is sold. This means that if you spend $10,000 on a bathroom renovation, you can expect to see $7,000 in added value to your home.
Other Popular Renovations
Other home renovations can include things like new windows, doors, or siding. These projects tend to be less expensive than kitchen or bathroom renovations, with an average cost of around $5,000. ADUs (accessory dwelling units) are also popular since working from home has become so popular due to the pandemic – ADU’s can run in the $100K to $200K range depending on how big and how many features you are looking for. Swimming pools are at the higher end of home renovations, with an average cost of around $50,000.
Paying for Home Renovations
There are a few different ways that you can pay for home renovations. Everyone’s situation is different, so here are some options to consider, both obvious and not so obvious.
Cash
If you have the cash on hand, you can pay for the project outright. This is often the best option as it means you will not have to pay any interest on the money you are spending.
Home Equity Line of Credit
A HELOC is a home equity line of credit. This is a loan that is secured by the equity in your home. The interest rates on a HELOC are usually lower than other types of loans, and you can typically borrow up to 85% of the value of your home. This can be a good option as it usually comes with a lower interest rate than other types of loans. However, it is important to remember that you are putting your home at risk if you default on the loan.
Personal Loan
If you don’t have equity in your home or you would rather not put your home at risk, you can take out a personal loan. Personal loans usually have fixed interest rates, and you can often get a loan for up to $100,000. However, the interest rates on personal loans are often higher than other types of loans.
Credit Cards
You can also pay for home renovations with a credit card. This can be a good option if you have a 0% APR introductory offer. However, it is important to be aware of the interest rate after the intro period ends as it could be quite high.
FHA 203(k) Loans
If you are planning on buying a home that needs renovations, you can apply for an FHA 203(k) loan. This type of loan allows you to borrow the money for both the purchase price of the home and the cost of the renovations. The nice thing with this type of loan is that you only have to make one monthly payment.
What’s the Best Option for You?
The best way to pay for home renovations will depend on your individual situation. There are a lot of different factors to consider, such as the interest rate, the amount of money you need to borrow, and whether or not you are comfortable putting your home at risk. Be sure to shop around and compare different options before making a decision.