10 Ways to Remodel Your Home Without Hurting Your Credit

6 Ways Remodel Home Without Hurting Credit

Owning a home is a classic part of the American Dream for many people. And, while purchasing just any old home may be within reach of many working Americans, that’s not really what we’re after, is it?

No, we’re interested in our dream home — and whatever that may mean to us personally. While the ultimate dream home might be a bit grandiose for most of our budgets, purchasing a home with potential and then investing in remodeling and ongoing improvements can be a satisfying compromise.

However, it’s important to exercise caution, as all home improvements are not created equal. In fact, some are — on paper, at least — a complete waste of money. Beyond the question of resale value, you’ll also want to consider how funding home improvements can impact your credit now and down the road. Keep reading for six ways to remodel your home without hurting your credit. The key to success is handling the situation strategically by considering all the angles.

Boost Equity with the Right Remodel

Getting a home equity line of credit (HELOC) is an easy way to finance the home updates and renovations you dream about as a homeowner. But, you’ll also want to carefully consider the long-term value of the investments being made in light of their personal and family financial goals. It’s important to consider factors that may impact how long you’ll stay in the house and how much you hope to get back if and when you decide to sell.

While a HELOC gives you flexibility in the amount of equity you access and what you spend it on, some home improvements go beyond just refreshing the look, feel, and functionality of your home.

Graphic Showing Home Improvement Values
This infographic from ThisIsMoney.co.uk shows common values for household upgrades.

Some improvements can actually increase the home’s value and, therefore, net a full return on your investment (in some cases, even more than what you invested). This is especially important if you plan to sell your home down the road.

Instead of taking out multiple lines of credit or any other drastic action to finance an improvement simply because you like how it will look, consider what you’ll get in return for the money you put in. How will the improvements increase your home’s overall value?

Remember, you have to pay that loan back, and the ease of getting a HELOC upfront doesn’t preclude what you’ll be paying off months later. It’s important to consider whether a pool, for instance, will still seem like a good idea when it comes time to repay the loan. (Hint: unless you use it a heck of a lot, it probably won’t.)

To get an idea of some of the smartest home-remodel projects to build equity, we’ve compiled a list of where your money will be best spent. These improvements will net a better return on investment and make the best use of your line of credit.

Big Ticket Updates

These items are likely to require high four- or five-digit investments, but they’re well worth the hefty investment. If you view your home through the eyes of a potential buyer, it’s easy to see why the words “newly remodeled” in front of these items can be a powerful selling point.

  1. Kitchen: Kitchen remodels are some of the most common projects homeowners take on, and for good reason. They go a long way toward making your entire home feel updated and modern. Even a basic kitchen remodel could cost close to $22,000, with high-end jobs at least doubling that. Still, a kitchen remodel is almost guaranteed to increase your home’s value.
  2. Roof: A roof is not only a functional necessity, it draws the eyes of potential home buyers, making it a savvy investment. You could spend as much as $8,000 for a new roof, but in many cases, you can recoup over 100 percent of that cost, and actually profit from it.
  3. Hardwood floors: Installing new hardwood floors is another highly prized home upgrade. While not cheap — new hardwoods can cost you up to $6,000 for an average-sized home — you’ll likely recover most, if not all, of the cost.
  4. Add Solar Panels: The average cost of installing solar panels is more than $10,000, but they can have a positive ROI on two fronts. First of all, if your electricity bills are sky high, solar panels can bring them down drastically, enhancing your monthly budget while also helping the environment. Going solar can also help in the long run, as Zillow reports that homes that install the panels sell for an average of 4.1% more than their counterparts on the market.
  5. HVAC Upgrades: Your heating, ventilation, and air conditioning system is another good place to make an investment that will pay off in the future. While installing a new unit could cost between $5,000 and $10,000, homes with updated HVAC systems sell for 5% to 7% more, according to Angie’s List. New, energy-efficient units can save you money on your electric bill and can improve the value of your property upon appraisal.

Even within the category of “big-ticket” upgrades, you can find ways to make your renovations more affordable, including getting your hands dirty with a little DIY. That being said, remember that some projects, such as plumbing or electrical work, are better left to the professionals.

Smaller Price-Tag Improvements

These suggestions should require a much smaller investment. And, in some cases, you or a friend may even be able to do some or all of the work yourself. Don’t underestimate their value, though. These seemingly small improvements can be powerful selling points in their own right, and do wonders for the first impression your home offers to potential buyers.

  1. Built-in shelving and cabinetry: Everyone loves more storage, especially custom nooks and crannies. Professionally built shelving and cabinetry will cost you a few thousand dollars, but you can also DIY for as little as $500. Whether you choose the professional or DIY route, you can be sure that this small upgrade is a win-win.
  2. Garage: Homeowners don’t often think about their garages when they’re considering a remodel. For around $2,000, a spruced-up garage facade can add all-important curb appeal while yielding a high return on investment.
  3. Open floor plan: It sounds hard to believe, but knocking down a wall and opening up your space is actually a budget-friendly maneuver that can make a huge difference. Demolishing an interior wall costs around $500 or less for labor, clean-up, and debris disposal. But this relatively small investment can give a big boost to your home’s value.
  4. Lighting upgrades: Replacing older light fixtures with new ones (especially in prominent areas) can help enhance the feel and functionality of your home. Adding smart bulbs is another modern touch, and this project shouldn’t cost you more than $500.
  5. Paint refresh: Adding a fresh coat of paint to the rooms in your home that see the most traffic is a quick (and DIY) way to make your home look like new. This is another job that shouldn’t cost you more than $500 — unless you decide to paint every room.

A number of other potential home improvements can boost the resale value of your home, including large additions (typically over 1000 sq. ft.), bathroom remodels, upgraded HVAC, and landscaping. Other common “dream” updates fall on the opposite side of the spectrum, being unlikely to recoup much or any of their cost in resale value. These include swimming pools, unique decorative features, and tiny additions (like a screen porch or sunroom.)

Keep Your Home (and Credit Score) In Shape

Speaking to an experienced local realtor is your best option if the return on your home improvement investment is paramount. They’ll be able to guide you to the best options for your money.

On the other hand, if you’re not concerned with selling down the road and you’re just looking to make your house into your dream for the long haul, then the sky’s the limit. Just improve — and borrow — responsibly.

Although home loans for remodels and repairs are common, your credit score can affect whether or not you get approved for a HELOC. Don’t let a credit problem halt your home improvement plans. Unfortunately, mistakes can and do appear on credit reports from time to time, whether it’s due to an old account hanging on to your report for longer than it should or even someone with a similar name having a card showing on your report.

A professional credit repair service could help you review your credit, resolve incorrect information, and address ways to reduce outstanding debt so you can start making the home repairs you dream about. But don’t forget, once your credit is back in good shape (and while it’s getting there), it’s extremely important to pay monthly bills on time to hang on to that new and improved score.