Refinance your home or remodel?

There are good and bad points to each home remodeling

The percentage of Americans who own their homes has risen to nearly 70%, which is a record high and the average price of a house in the United States now exceeds $215, 000, also a record high. But what do you do when that house you own is suddenly too small for you? What do you do if you want a game room or an exercise room but don’t have one? For most people, the answer would be a simple one - move.

True, buying another house and “trading up” has long been an accepted way of doing things. Young couples often buy a “starter home” when they first get married but then sell it and move to a larger piece of property after they start a family. But with housing prices increasing and interest rates rising, it may not make sense to trade up. In some markets, such as Los Angeles, the median price of a home is in the $500,000 range, which makes moving to a larger than average home prohibitively expensive. If it costs you an extra $250,000 to get that extra bedroom or space for a pool table, is it worth it?

There may be a better option - remodeling. It may make sense to either add on to your existing house or to remodel existing features. If you have been fortunate enough to see your home’s value increase during the price run up of the last five years, you may have a sizable amount of equity in your house. With that, you can take out a home equity loan or line of credit to pay for the work. Even better - the interest on the loan is tax deductible.

Some renovations or add-ons will even increase the value of your house. It depends on what you wish to add. The top of the list is always a kitchen - big, functional kitchens are always at the top of everyone’s list, as are modern bathrooms. If your kitchen still has appliances in Harvest Gold, it may be time to give it a makeover. New cabinets or countertops and a new cooking surface can make all the difference in the world. And if you home doesn’t have a den, adding a den or game room could add both function and value to your property.

You should watch what you add, though. You may be a car buff, but adding a five car garage in a neighborhood where everyone else has two car garages may be overkill. The same may apply to a swimming pool, particularly if you live in a neighborhood where they are not particularly popular. Unfortunately, the additions that can make your house easier to sell later are often defined by what your neighbors are doing.

Still, adding on to your property or remodeling older furnishings usually helps the value of a house. And as we pointed out, it is far less expensive than selling your existing home and buying another one. After all, if your current house doesn’t suit you, it may not suit a potential buyer, either. Before you pack up and go, give some thought to adding on or remodeling. It may be just the answer you need.