Keep Up with Joneses

By Marcus McCue, vice president of Guardian Mortgage Co. Inc.

One of the pleasures of owning a home is having the freedom to customize it to your liking.

Remodeling, especially for older homes, can make the house more functional and enjoyable. And, if planned correctly, renovations or additions can increase resale value.

You’ve probably heard that one can’t go wrong by investing in kitchen remodels, but it turns out that the best advice is to “keep up with the Joneses.”

Jim Goodrich at Goodrich Appraisal in McKinney is one of the best valuation professionals in the business and his three rules for deciding on home improvements when the goal is to recover the cost or profit from the investment are:

  • Look around
  • Look around
  • Look around

Goodrich’s advice boils down to this: “Are your neighbors doing what you have in mind? If you’re considering adding a pool, are pools common in your area and price range? If you’re in Plano and you have a newer house in the $500’s you had better have a pool,” he said. “Everybody else does. It’s what the market wants.”

In East Dallas, on the M Streets for example, Goodrich points out that pools are not that common and are not high up on the buyer’s want list. The value added will likely be less than cost.

“But if you’re gutting the master bath on the M Street house, you’re now doing something that many others have done and what buyers want. You have a much better chance of recovering your cost,” he advised.

Financing home improvements also requires homework and you should consult a mortgage lender to determine your best options. Here are a few basics of some of the more common loans available:

  • Cash-out refinance on the primary mortgage, where the amount of equity is added to the current loan balance and results in one new loan amount at rates that are typically only 0.125 percent to 0.250 percent higher than regular rate and term refinances.
  • A second-lien equity mortgage up to 80 percent of the home value — the maximum allowable in Texas — that can be a fixed-rate loan up to a 20-year term, or a home-equity line of credit, HELOC, with a variable-rate line of credit secured by the home. Second-lien loans have higher rates than primary mortgages.
  • Home-improvement loan on the “improved value” of the home, where the lender provides the borrower with additional value for the improvements being made. This financing is commonly up to 90 percent of the improved value of the property and is typically financed on a fixed-rate mortgage up to a 15-year term.

Choosing what home improvements to make and how to pay for them are personal decisions as unique as your home, but with a little awareness and some homework, the renovations should fit your lifestyle … and could pay off in the future.

Marcus McCue is vice president of sales for Guardian Mortgage, which has financed dozens of East Dallas homes, and enjoys mentoring homebuyers to become smart borrowers. Follow him on Facebook.

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