With interest rates at record lows, many homeowners are using their equity to pull out cash. That dream kitchen, spa bathroom, three-car garage or project they’ve been wanting to do for years is finally possible. Maybe you’ve been toying with the idea of putting on a room addition…
But should you eat up your equity in your current home?
First, how long do you plan to stay in your home? If it’s for five years or less, modest upgrades like paint and flooring may be the ticket. Large, expensive remodels will not only use up your cash, but you won’t get your money back for years. These projects are best if you plan to stay a long time.
Second, does the project make the house into what you want it to be? For example, let’s say remodeling the kitchen and bathrooms, and building a deck, costs $70,000. Will that give you everything you want in your home? Or have you always wished for an extra bedroom, a finished basement, or a larger lot?
Third, are you in your ideal location? If your home is exactly where you want to be, then it’s worth investing into. However, maybe you plan to move closer to adult children and grandchildren, or further away from work once you retire.
Before you spend that chunk of equity from your current home, think through how long you want to stay there and if the improvements will give you everything you want. You may be better off taking your equity and upgrading to your dream home. With current interest rates, you can get a lot of house for your money. And instead of just getting your dream kitchen, you get your dream home!