20 Oct

High Value Home Improvements to Make with Your HELOC

Did you know about 50% of Home Equity Line of Credit loans, aka HELOCs, are used to make home improvements according to the US Census Bureau’s Housing Survey? It’s a common sense move since the updates you make, especially in Denver’s market, are likely to reap rewards when you decide to sell. You can even use some of the new equity in your home you’ve earned with your labor (or a contractor’s) to pay for the old equity you borrowed. Winner! Winner!

How is a HELOC different than just a loan? A home equity line of credit is more like a credit card than a loan. Once the line of credit has been approved, the homeowner decides if and when to use the money and can withdraw it from the account as needed. Payments aren’t due until there’s an outstanding balance on the line of credit.

We published a post about HELOCs and rising home prices in Denver in an April 2015 blog post and one and a half years later, the song remains the same – home prices are still HOT. The average sold home price in metro Denver was around $398,663 then and now it’s just slightly lower at $396,700.

Did you know there are also tax benefits to getting a HELOC? If you itemize your taxes, you may be able to deduct the interest paid on a home equity loan or HELOC if the loan amount is limited to $100,000. It doesn’t matter if you used the money for home improvement, or a car, or a trip of a lifetime.

If you’re ready to build equity and want to choose a midrange remodeling project that will yield the greatest return, check these recommendations. Source: Remodeling Magazine’s Cost vs. Value 2016 edition for Denver, CO.

  1. Minor Kitchen Model
  2. Front door
  3. Deck
  4. Convert attic into a bedroom
  5. Garage Door Replacement

Even if you’re not going to be selling right away, consider how your HELOC can improve your quality of life in the home you’re in now. Consider the following scenario. Your home is worth $300k with a remaining mortgage of $150k, so you have $150k of equity in the home and you decide to invest $50k in a major kitchen remodel. The average ROI on this investment is 65 percent, so the project adds $32.5k of value to the home. While you now owe $200k on the home, it is now assessed at $332.5k. The homeowner has decreased the home’s overall equity by only $17.5k, and now enjoys a brand new $50k kitchen in a home that still has plenty of equity.

Talk to one of our RMLEFCU associates today about a HELOC! Find out more about our HELOC offerings here.

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