Home renovation

Home renovation boom: here are the most popular projects and how to pay

With so many people working from home — and opportunities to leave limited by the ongoing coronavirus pandemic — many homeowners have found their abodes lacking more space or amenities. The result is a home renovation boom that shows no signs of slowing down.

If you’re thinking about nesting and taking on a home improvement project, you’re clearly not alone. Here are the most popular home improvement trends these days and tips on how to pay for projects.

What kinds of projects do people do?

Before the coronavirus pandemic, the most common home improvement projects were kitchen and bathroom renovations. According to the National Association of Home Builders (NAHB), this type of work is still hugely popular, but it’s being joined by a new trend that reflects pandemic-related lifestyle changes.

“When we surveyed renovators, we asked them specifically for which projects you saw an increase in demand specifically due to the pandemic,” said Paul Emrath, NAHB vice president, survey and policy research. of accommodation. “One was bathrooms, two were terraces and three were kitchens – and four and five were patios and porches.”

Because people are spending more time at home, he said, they are investing in making their homes and properties more multifunctional.

“I think the obvious explanation is people think they’re going to be spending more time at home. Rather than going out somewhere, they’re entertaining on their patio or deck,” Emrath said. He added that there has also been an increase in the number of landlords adding additional rooms or converting existing rooms into home offices.

How much are people spending?

NAHB data has shown that there is demand for renovations at all price points. The highest demand is for projects that cost less than $20,000, but demand is rising across all price ranges, including large-scale renovations that cost $50,000 or more. The price of a renovation is mainly determined by the scope of the work.

Emrath said there’s been no shortage of home improvement demand, but supply chain issues are causing delays and higher prices on some projects, and that trend is likely to continue for the foreseeable future.

“The main reason why our guidance isn’t stronger than it is would be because of supply constraints,” he said. These issues make things like lumber and other building materials harder and more expensive to find, and it could drive up the costs of some projects.

How can I pay for a home renovation?

If you don’t have the money for renovations, there are ways to pay the bill on credit, such as a home equity loan or a line of credit.

“The appreciation of existing homes is always one of the factors that increases the demand for renovation as an investment,” Emrath said. “People have more equity in their homes, which helps them get loans, and the interest rates on those loans are low, which helps applications.”

A cash-out mortgage refinance would give you a lump sum to pay for construction. The repayment would be incorporated into your new mortgage.

Similarly, you can take out a home equity loan or open a home equity line of credit, both of which use the equity you have built up in your home to help you obtain funds. Interest rates on home equity loans or HELOCs tend to be higher than first mortgage rates, but closing costs can be lower, so they could be a cost-effective option depending on your financial situation.

Some borrowers may also qualify for government-backed home improvement loans, such as Fannie Mae’s HomeStyle Loan or FHA’s 203(k) mortgages.

The best product for you largely depends on your financial situation and credit score. Here are some of the basic requirements:

Fannie Mae HomeStyle Loan 620 5% deposit
FHA 203(k) loan 620 3.5% deposit
Home Equity Loan / HELOC mid 600s 15% equity
Refinancing by collection varies by lender 20% equity

You can also consider taking out personal loans, or even paying with a credit card for smaller projects.

At the end of the line

Demand for home renovations is particularly high right now, so chances are that if you’re a homeowner, you’re thinking about sprucing up your place. If so, there are many ways to pay for the project, and you should consider all of your options to determine what is best for you.

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