It's a tough choice for a homeowner: Move into a new house, or improve the one you have. It seems so easy to call a realtor and arrange a showing. But your current home has something no new home can offer — equity.
Home equity provides homeowners a ready financing source to turn home sweet home into home sweet dream home. On average, homeowners spend 18 months planning home improvements. It's time well spent; some renovations pay off better than others.
Bathroom and kitchen renovations provide the greatest return, between 90 percent and 95 percent. Decks and home offices hold the low end, between 65 percent and 70 percent.
As you plan, look beyond your house to your neighborhood. Will renovations put you in a different league — and price range — than your neighbors? Also, keep in mind how long you'll be in your house.
If you're going to fix it up and sell in six months, you'll get all the pain of remodeling and not much gain. But if you plan to live in the house more than three years, it makes economic sense to remodel.
How do you calculate your available equity? First step: Say you made a down payment of $20,000 on a house priced at $100,000 five years ago. Since then, you've paid $15,000 toward the principal, and the market value of your house has increased to $115,000.
The sum of your down payment ($20,000), principal paid ($15,000), and the increase in property value ($15,000) gives you $50,000 in equity.
Second step: Ideally, what you owe on your home — mortgage plus home equity loan — shouldn't exceed 80 percent of your home's value. So 80 percent of $115,000 suggests, if you meet other lending yardsticks, you may be eligible for as much as a $27,000 home equity loan (house is worth $115,000; 80 percent of that is $92,000; you still owe $65,000 on the first mortgage; so $92,000 - $65,000 = $27,000).
Contact Jersey Shore Federal Credit Union (Federally insured by NCUA) to discuss your home equity loan options today. Call Cape May County’s only community credit union at 888-658-5062 or stop by the Rio Grande Plaza Office at 3317 Route 9 South in Rio Grande.
You can also visit Jersey Shore Federal Credit Union on the web at www.jerseyshorefcu.org to view all home equity loan rates.