4 Projects That Will Increase Your Home Equity (And 4 That Won’t)

high mortgage rates, low inventoryand improved house price Many Americans have put their home buying plans on hold. On the upside, however, most people who have bought a home in the past few years have seen a significant increase in their equity.

If you’re looking to make home improvements that will increase the value of your home — or help maintain it When the price falls — a Home equity loan or credit line Could be a good alternative. Both allow you to access large amounts of money, and when you use it to qualify for home improvements, interest can also accrue. duty free. Plus, you can get Competitive interest rates When you borrow from home equity today.

But which home improvement projects offer the best return on your investment and which ones should you avoid? Here’s what the experts have to say.

Start comparing home equity rates you may qualify for today here.

Four projects that will increase your home equity

First, here’s a look at four projects that experts are talking about Increase your home equity.

1. Kitchen remodels

Kitchen remodels or upgrades not only have higher cost recovery rates, but also lead to higher satisfaction levels.

“I once oversaw a remodel where we incorporated energy-efficient appliances, modern countertops, redesigned cabinets, and introduced a more open layout,” says Roman Smolevsky, owner of A+ Construction & Remodeling. The investment – ​​usually the heart of a home – can recover between 60% and 80% of the cost.”

Data from the National Association of Realtors (NAR). 2022 Remodeling Impact Report Aligns with Smolevki’s estimates reporting a 75% cost recovery estimate on a complete kitchen renovation. Additionally, this project type earned a 9.8/10 “Victory Score” from the report, which measures the happiness homeowners experience as a result of renovations.

2. Energy-efficient upgrades

Energy-efficient upgrades can not only increase the value of a home but also save homeowners on their energy costs each month.

“Energy efficiency may not strike as an exciting feature, yet it holds enormous potential. Steps such as sealing cracks, ensuring proper insulation and fitting Energy Star-rated windows can lead to substantial savings and attract a growing segment of eco-conscious buyers. can,” says Eric Bramlett, a Realtor and owner of Bramlett Residential

For example, the 2023 Cost vs. Price Report Remodeling has shown that an HVAC conversion/electrification offers a 103.5% cost recovery rate.

3. Bathroom remodeling/addition

Bathroom remodels also tend to be value-adding — whether you want a complete renovation or small changes like new fixtures or fresh caulk.

“My team and I have found that a tastefully remodeled bathroom or a strategic addition can bring an attractive ROI. One particular project involved replacing a dated bathroom with energy-efficient fixtures, a walk-in shower and a double sink vanity. Home Value Skyrocketing, with an estimated cost recovery of about 70%,” says Smolevsky.

4. Add usable living space

If you’re willing to take on a significant project, adding more usable living space to your home can be a good investment.

“Whether it’s a basement conversion, an attic conversion, or a deck addition, creating more usable space is a definite value enhancer,” says Smolevsky. The NAR report found that converting a basement into a residence offers an 86% cost recovery, while an attic conversion offers 75%.

If you focus on your outdoor space, remodeling reports a 50% cost recovery on new wood decks and a 39.8% cost recovery on composite decks. “Whether you choose wood or composite, a deck offers an irresistible extension of indoor living space to the outdoors. It’s a drawcard for buyers who love the idea of ​​a relaxed, open living space,” says Ryan Fitzgerald, a Realtor and owner of Raleigh Realty. .

Ready to start working on a project? Compare today’s top home equity rates now!

Four projects that won’t increase your home equity

Now that we have covered four projects that are equity boosters, here are four possible money pits

1. Overly personalized reforms

Reforms that are too personalized for any individual taste can be problematic, as they do not appeal to most buyers.

“While it’s great to showcase your unique style, odd paint colors, unconventional flooring choices or room themes can limit appeal to buyers,” says Michael Winkler, co-founder and chief strategist at Sell Home Today. Opting for a timeless, neutral design ensures broad market appeal while protecting your home’s value.”

2. High-end upgrades to a mid-range neighborhood

Another questionable investment is high-end upgrades to homes in mid-range neighborhoods. Make sure you are familiar with the market in your neighborhood and what buyers can expect.

“I’ve seen a few instances where homeowners have made luxury upgrades in a mid-range neighborhood,” says Smolevsky, “unfortunately, these rarely recoup their costs.” He explains that potential buyers are often unwilling to pay a premium for an unusually advanced feature.

3. Awesome Landscaping

While landscaping can be a worthwhile investment, there is a fine line between enough and too much.

“High-end landscaping is another project that often fails to yield good returns. While curb appeal is important, buyers may not value elaborate gardens or planting exotic trees like yours.”, says Sri Ganeshram, CEO and founder of Shamiana.

“Instead, focus on creating a clean, well-maintained outdoor space that any buyer can easily customize to their liking,” he adds.

Start comparing home equity rates that can help you complete your renovation or home project today.

4. Swimming pool

Thinking of adding a swimming pool to your backyard? Pools can greatly enhance a home and backyard, but they aren’t a big value booster.

“Contrary to popular belief, pools often do not provide high returns due to maintenance and safety concerns. I have overseen a project that added a pool to a property, expecting it to increase in value. Unfortunately, buyers saw this as a potential liability, pool ROI. limiting,” says Smolevskiy.

Should you tap into your home equity and invest in your home?

Invest funds from a Home equity loan or HELOC Home improvement projects can be an effective way to improve your home and increase its market value.

These loans are secured by your home, so you may be able to score better interest rates than personal loans or high-interest credit cards. Make sure you know all the terms of your financing options before you make a decision. And remember, to get the best value from your home equity, you’ll want to make sure your renovations qualify for tax deductions with the IRS and that you choose projects with high cost recovery rates.

“The key thing to consider when determining which projects are the worst for home value is whether they align with the preferences and expectations of potential buyers,” says Samantha Odo, a real estate agent and chief operating officer at Precondo. “It is important to prioritize projects that are broadly attractive and offer a good balance of functionality, aesthetics and market demand,” he added.

Find out the best home equity rates you can qualify for and start comparing offers now.