Renovations to Your Home

With mortgage interest rates at levels not seen in more than a decade, home renovations this year might surprise the experts and see an uptick in activity.¹

The Joint Center for Housing Studies at Harvard University has predicted a 6% drop in home renovation spending through the second quarter of 2024. The study concluded that the home improvement projects caused by the “widespread adoption of working from home” have been completed and other work is expected to slow.²

On the other hand, 92% of US homeowners have mortgages with an interest rate below 6 percent, well below today’s prevailing rates. Homeowners with low interest rate mortgages are often tempted to stay put rather than move and take on a higher borrowing rate. That may mean more home improvements may be considered in 2024.3

We know many of you fall into the 92% camp. So we wanted to provide a little guidance, in case you’re entertaining the idea of starting a home improvement project this year.

The average homeowner pays $18,000 for each home improvement project. But this number can fluctuate based on a variety of factors, including the age of your home, type of project, and where you live.4

More than 60% of homeowners reported that they paid cash for their home improvement projects in 2023. But a word of caution. More than one-third of homeowners reported going over budget with their project. So if you are prepared to use cash, you may want to consider smaller projects first so you don’t end up spending more than you intended.4

Here are a few more choices to consider when paying for renovations:5

Home improvement loans:

These are unsecured personal loans offered by some banks, credit unions, or other online lenders. These loans are unsecured, meaning you don’t need to use your home as collateral to get the loan. Keep in mind that home improvement loans typically have higher interest rates than other loans.

Credit cards:

If you’re considering a small improvement, credit  cards might be a consideration. But before using a credit card, it might be best to prepare a pay-back strategy.

Cash-out refinance:

With a cash-out refinance, you would replace your existing mortgage with a new loan with a new interest rate. With mortgage rates at 20-year highs, many factors should be considered before moving ahead with this approach.

If you’re thinking about a home improvement this year, let’s talk about your ideas and your strategy for financing the project. We’ve touched on just a few financing choices available. As we review your ideas, we would evaluate all of your financial commitments for 2024 and beyond.