Hi everyone! Currently 2 bedroom 1 bath homes in my area are going for around 185,000. Occasionally you'll see the one listed for $245 but it sits and sits. We want to add equity by making updates to our home. We just bough beautiful stone backsplash tiles for the kitchen, put in new appliances, are planning on granite countertops and are going to put up mouldings throughout the house. We owe $218,000 and need to build a bedroom onto the house for my daughter (she is almost 9 and my son is 6, they currently share a room) so we want to build up our equity to hopefully get some kind of an equity loan. Does anyone have any ideas or suggestions that might help us? Thanks!
So many things to consider - 1. don't spend more money on cosmetics - they add nothing to the appraised value. 2. What are 3 bdr's selling for? 3. Will the floor plan allow for a logically placed 3rd bdr and a bath? 4. Have you talked to your bank? 5. Will you bring ** to the closing? 6. Is there any way you can bring "sweat equity" to the building process?
Right now you owe more than the loan value. That means you have $0 equity. If you can add an addition without going too far in the hole you can add equity, but additions are not cheap and can be difficult and disruptive.
I also 2nd adding at least a 3/4 bath if and when you add on.
The best way to build equity, IMO, is not to spend money beyond basic home maintenance and to pay down your mortgage as quickly as you can. One way is to add extra money each month to be applied to the principal of your mortgage so that you, in effect, make 13 or 14 payments per year. BTW, you don't need to pay a lender a service charge for the "privilege" of making biweeky payments; you can do it yourself.This message has been edited. Last edited by: aychihuahua,
It has nothing to do with my financial situation. The market has crashed and a lot of people are upside down in their house. I was just wondering if updating the house would have it appraise higher and make the value worth more so we may be able to take out home equity loan for an addition. I know that kitchens and bathrooms are usually a good place to start. Just wondering if anyone had suggestions on what improvements may raise the value of your house. Thats all.
No magic here. A loan appraiser will not consider upgrades to interior trim and surfaces as big dollar value increases to your home (unless it was really BAD to begin with). The advice here is sound. Save your money, and perhaps attempt to pay down your current mortgage as suggested or wait until housing prices take a turn upwards in your area. Kind of a catch 22, sorry.
weg326, Glad to see your post here - you will receive a lot of responses - all honest but you do need to realize practicalities vs. reality.
Bottom line, I know cosmetic improvements - ones you charge and have to pay for later - DO NOT INCREASE the appraisal amount. If you are set on making some changes, add a bathroom and, possibly, even a 3rd bedroom if the architecture allows but here is the secret rule for increasing your equity position:
Take the money you would spend to make improvements and, instead, send it to your mortgage holder ... you will gain more dollar per dollar by reducing your mortgage than spending money to "prettify" your house. JMHO -
I agree. The changes we are making are much needed improvements that we want to make for ourselves and we don't charge them and pay for them later. We wait til we can afford to pay for it at the time it is done. However, the suggestion of paying down the principal to make more equity in the house makes a lot of sense and we will be doing that as well. I think I have been watching to many home improvement shows where they move walls and update kitchens etc and all of a sudden the "value of their home" has increased by like $50,000 dollars. The reality of it also is that we are not going to be able to come up with $50,000.00 to add a dormer (3rd bedroom, 2nd bathroom etc) on our own and wish we had the equity to take out a home equity loan to add onto the house but with the market the way it is that's not going to happen either.This message has been edited. Last edited by: weg326,
As eeryone has stated here, the only two things that will improve your equity are. paying down your mortgage or adding square footage, no cosmetic improvement will make your home gain equity. just simply sell sometimes faster.
Posts: 4634 | Location: 0 | Registered: May 31, 2007
The added floor space and bathroom will improve the bottom line. Talk to your builder/contractor to get a bare bones number to do what you would like, add a bdr and bath. Find out what you can contribute to reduce the cost - sweat equity. Then take that info to the loan officer at your bank to see if it is doable. The main area of concern is housing values in your neighborhood.
If you can't get the comps to cover the investment - you won't get a loan.
Since we are serial renovators, and tend to like granite and the like, we determined up front that anything we did, we couldn't expect any return from. When the bank appraises a house, it's kind of like a small range of dollars - and if the house is in disrepair, it's at the bottom of the range, and if it's fabulously updated, it's at the top. Doesn't seem to add any equity, it just gets you at the top of the range (based on comps around you). So, while I LOVE the renovation shows, I know that doing those renovations doesn't add any real equity - but it sure does make someone pick your house when it goes up for sale (ours sold in 3 days, multiple offers) - BUT, the price didn't really have anything to do with what we did - it had to do with the comps around us. It does sound like you made the renovations for the right reasons though - because you wanted them. For the equity - we have always done what was suggested here, which was to pay extra on the principal every month. Also, it has been our experience that when we go to refinance, or change our loans in any way, the appraisers appraise low - not sure if that is the standard, but it has been our experience..... Best of luck!
Originally posted by DebiinFL: Since we are serial renovators, and tend to like granite and the like, we determined up front that anything we did, we couldn't expect any return from. When the bank appraises a house, it's kind of like a small range of dollars - and if the house is in disrepair, it's at the bottom of the range, and if it's fabulously updated, it's at the top. Doesn't seem to add any equity, it just gets you at the top of the range (based on comps around you). So, while I LOVE the renovation shows, I know that doing those renovations doesn't add any real equity - but it sure does make someone pick your house when it goes up for sale (ours sold in 3 days, multiple offers) - BUT, the price didn't really have anything to do with what we did - it had to do with the comps around us. It does sound like you made the renovations for the right reasons though - because you wanted them. For the equity - we have always done what was suggested here, which was to pay extra on the principal every month. Also, it has been our experience that when we go to refinance, or change our loans in any way, the appraisers appraise low - not sure if that is the standard, but it has been our experience..... Best of luck!
Seems we are on the same page. That has been our way of thinking for many years. Our experience has been virtually the same as yours.
In my area of NJ additional square footage seems to be the way to add equity. Turning an attic space into a guest room , or finishing a basement gets you a good return, but I guess things are different depending on where you live.
Posts: 1479 | Location: Morristown | Registered: Jun 12, 2010
