When you ask financial and real estate professionals about the best use of a home equity loan or line of credit, the top answer is pretty consistent.
Put it back into the house.
You just can't go wrong with using that money to make your home bigger, or nicer, and certainly more valuable.
You won't be alone.
According to Harvard's Joint Center for Housing Studies, homeowners spent just under $150 billion on remodeling projects in 2005. That's an increase of 43% in just four years.
Our culture reflects that. Entire television networks, such as HGTV and the DIY Network, have sprung up, devoted to home improvements. Who would have ever thought there would be TV shows about paint and that people would actually watch them?
With all that stimulation, all those great ideas and all that cash sitting waiting to be spent, it would be really easy to go overboard on projects that won't pay you back in the long run.
To find out which projects do put money back in your pocket, we went straight to the mother lode of data - the annual cost versus value home improvement survey by Remodeling Magazine and the National Association of Realtors, which aggregates information from 58 markets nationwide.
But we decided to create our own Interest.com Top 10, based strictly on the cost recouped at resale.
We pulled out variations on the same themes, such as one kitchen remodeling project instead of minor, mid-range and upscale kitchen renovations, which the annual survey breaks out in great detail. In those cases, we gave you the version that produced the highest rate of return.
Our Top 10 home improvement projects, with the national average for cost, resale value and the percentage of the cost that was recouped, are:
1 Upscale siding replacement costs $10,393 and adds $10,771 to your homes value, or 103.6% of the cost.
2 Mid-range bathroom remodeling costs $10,499 and adds $10,727 in value, 102.2% of the cost.
3 Minor kitchen remodeling costs $14,913 and adds $14,690 in value, 98.5% of the cost.
4 Adding an attic bedroom suite with bath costs $39,188 and adds $36,649 in value, 93.5% of the cost.
5 Adding a deck costs $11,294 and adds $10,196 in value, 90.3% of the cost.
6 Remodeling the basement costs $51,051 and adds $46,010 in value, 90.1% of the cost.
7 Replacing the windows costs $9,684 and adds $8,681 in value, 89.6% of the cost.
8 A mid-range bathroom addition costs $22,977 and adds $19,850 in value, 86.4% of the cost.
9 Replacing the roof costs $11,164 and adds $9,456 in value, 84.7% of the cost.
10 Adding a family room costs $54,773 and adds $45,458 in value, 83.0% of the cost.
A minor facelift would include things such as relacing faucets, new flooring, new wallpaper or tile, new towel bar and toilet paper holder, maybe new doors for the shower.
Mid-range remodeling adds new vanities and countertops, mirrors, medicine chest, and maybe pulling the toilet and doing a new tub surround.
A mid-range addition involves building a new bathroom with moderately priced fixtures, such as $165 for a solid surface countertop with built-in sink as opposed to $500 for a custom-ordered sink that you would expect in a luxury addition.
If the prices seem a little more than you expected, there are several reasons:
So, how do you decide which project to do, and how far to go?
The old maxim of "If a little is good, a lot must be better'' does not always apply in the world of real estate.
If the goal of your project is to increase the value of your home for resale, your project needs to reflect the neighborhood.
It is completely within the realm of possibility to spend six figures on a kitchen renovation, but unless you live in a neighborhood of million-dollar houses, you want to scale things down a bit.
The same goes with bedroom and bathroom counts. If your neighborhood is chock full of three-bedroom, two-bath houses and your house only has one bathroom, you're at a serious disadvantage on the resale market. Adding on a bathroom would make a big difference.
Then, you have to consider all the costs involved with a renovation. A swimming pool is the perfect example.
Building the pool is just the beginning of the expense. The same is true of adding on a family room or remodeling a basement or attic.
Not only do you have the structural costs, you also will need to furnish those spaces and heat and cool them year-round. So add those costs into your budget.
Finally, some decisions are made with the heart as much as the head. Maybe you've always wanted a gourmet kitchen, or a tri-level deck with a hot tub and an outdoor kitchen, or a home theater with enough speakers to have your own rock concert.
You have every intention of living in this house for the rest of your life, you know you'll never get the money out of it that you put into it, and you don't care. If you can afford it, knock yourself out. It's your house, your money and your life.
Go for it.