Richard Barrington

 

Just about every homeowner has a wish list of home improvement projects. The best way to start working through this kind of wish list is with an organized and structured approach. This article will detail how to do that, from planning the projects themselves to evaluating home improvement loan quotes. Following the ten steps below in order will help the coordination of projects and obtaining a home improvement loan fall into place smoothly.

 

1. Create a list of potential projects. The first home improvement idea that comes to mind isn't necessarily the best immediate use of a family's resources. Think ahead and create a list of all potential projects that might arise over the next five years. These include replacements and upgrades as well as the addition of space or features.

 

 

2. Evaluate which projects are likely to add most to the home's value. Generally, home improvements that add square footage or in-demand features add the most value to a home. Also, projects like replacing windows or updating the heating system can be budget boosters by making the home more energy-efficient. In contrast, there are features like fountains, which are more a matter of individual taste, and these may not add as much to the home's value.

 

 

3. Prioritize the list of projects. While the preceding factor--potential value added to a home--should be a consideration in prioritizing a list of potential home improvement projects, so should urgency and personal appreciation. Home owners who plan on selling in the next few years should put the highest priority on projects which will add to the home's value and marketability, while home owners who plan to be in the house for a long time can give greater weight to personal preference.

 

 

4. Make a rough cost estimate for the list of home improvement projects. Starting to put dollar values next to each item will indicate how large a home improvement loan will be needed, and how many projects can be tackled at once. If you have a contractor already, ask for estimates;otherwise home improvement magazines or Web sites can provide price ranges of common improvement projects.

 

 

5. Review current home equity status. Home equity is the difference between a home's value and the remaining mortgage balance, so there are two variables that will need updating. Home values have been fluctuating quite a bit in some parts of the country, so it may be necessary to get some up-to-date comparisons that will help estimate the home's current value. Knowing how much home equity is available will help determine which projects can be tackled at this time and which may have to be deferred.

 

 

6. Check credit status. Credit scores and other credit report data provide a reality check--indicating whether a home improvement loan is likely to be available, and if the applicant's credit rating will warrant interest-rate surcharges or discounts. In some cases, it may make sense to defer home improvement projects until credit status has been improved.

 

 

7. Cash-out refinance, home equity loan or HELOC? A traditional home equity loan makes sense for large projects or groups of projects that can be tackled all at one time. If there is likely to be a sequence of smaller projects over time, a home equity line of credit (HELOC) may be the most efficient form of home improvement loan. Finally, homeowners may be able to improve their mortgage as well as improve their home. If an existing first mortgage could be replaced with a better one, cash-put refinancing could be the smartest solution.

 

 

8. Check out several contractors. Many times the desired effect (for example energy efficiency, additional space, more light, extra security) can be achieved in different ways. Savvy consumers take advantage of the professionals' expertise and learn the pros, cons, and costs before committing to a home improvement plan. Then they work with the contractor they feel comfortable with and trust.

 

 

9. Request home improvement loan quotes. Interest rates vary, so obtaining multiple home improvement loan quotes can result in significant savings.

 

Use a loan calculator to create a monthly budget. Using the best home improvement loan quote and the estimate from your contractor, use an online loan calculator to see what the monthly cost will be. Be sure to budget for this before borrowing.