If you’re one of the lucky ones who purchased a home prior to the recent real estate price spike, then you may be dreaming about using your home equity to remodel. When is and isn’t that a wise idea? Unfortunately, there isn’t a simple answer. Here are some of the parameters to consider:
First, there are different ways to tap your equity, with differing costs and tax consequences, including a line of credit, refinancing, or getting a second mortgage. You’ll want to talk with your tax advisor about these options.
Next, factor in how many years you have left to pay on your primary mortgage, and your exit plans. That is, when will you sell/retire, etc.
Third, factor in the potential loss of equity…if you plan to sell in five years, it’s possible the market may have fallen below your combined mortgage and home equity loan. You may decide to take a smaller equity loan to be on the safe side.
On the other hand, if your home is in poor condition or suffers from obsolete functionality, then remodeling can add value to your life as well as your property. Contact us at Henry Watts Real Estate for a before and after home price valuation to help you make that decision.