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Big-ticket items offer solid ROI for home improvement financing

Posted on Monday, February 10, 2014 at 10:07:48 AM

The value of many popular home improvement projects continues to rise, according to Hanley Wood's 2014 Cost vs. Value Report. This statistic dropped from 2006 to 2012, but the last two years have seen that trend reversed. Now, the most cost-effective upgrade is a back-up power generator, followed closely by an attic bedroom and a deck addition.

This is good news for those interested in affordable home improvement financing. More projects are providing a quality return on investment, or ROI, and that means more money in the homeowner's pocket when it comes time to sell. However, there are still some important tips and tricks to keep in mind when tackling a large renovation. Recently, Home Loan Investment Bank's Brian Harvey explained some effective strategies to maximize the potential of any home improvement project. 

He noted that the Hanley Wood report found the value of remodeling up for the second year in a row. This is likely related to a stronger housing market and stable home values. As resale prices tick up, coupled with a mild rise in construction costs, these "big-ticket projects" have seen a dramatic increase in ROI.

"The best performing big-ticket projects continue to be attic, kitchen, basement and bedroom remodeling," said Harvey. "These projects, however, can come with a significant cost and presently do not offer the opportunity to recapture a 100 percent or higher return on the investment. Homeowners will find an ROI at the time of resale ranging between 60 percent to 80 percent on these big-ticket projects, but there are smaller replacement projects that will return an even investment and a possible gain on that investment. Decking, entry doors, garage doors, and back-up power generators all performed the best with siding and window replacement increasing as well."

In addition to a total renovation, homeowners have the option to spend home improvement financing on replacement projects instead. 

"While these have a better ROI, they are a smaller investment and innately a smaller return," stated Harvey. "They will help with resale of the home from the perspective of curb appeal, but not significantly impact the price your home is valued at. The big-ticket projects are ways to update the interior of the home and add living space. The return on these investments will be realized by the value or resale value of the home in comparison to other like properties in the area. These types of projects can be a stepping stone to improved livability and lifestyle of your home, or to offer the amenities that a buyer may be looking for and not find in similar homes."

With that in mind, anyone interested in home improvement financing should pick their projects wisely, with the goal of the biggest possible ROI when they are finished.