Home Improvement

Spring is the perfect time to tackle your home renovation to-do list, but it can be a challenge to figure out which projects will yield the greatest return on your investment. If you’re thinking of refinancing your home to pay for these projects, there is a lot to consider. Does it make sense to focus on curb appeal, or update the kitchen? What are your goals? What are your financing options? Figuring out where to start can be overwhelming. To help us prevent decision fatigue from stifling our home improvement plans, we turned to Carmen Caputo, Vice President & Mortgage Loan Manager at Fidelity Bank, who guides clients through this process every day.  

Adding Value

• Kitchens & Bathrooms: When prioritizing your home improvement wish list, it’s important to know which renovations will add value to your property. “The general consensus in the real estate community is that you should start with updates to the kitchen and bathroom,” Carmen said. “If you’re going to invest money, that’s where to do it.” Kitchens featuring stainless steel appliances, marble countertops, islands, updated cabinetry, bright colors and airy spaces are right on trend. Buyers also look for large bathrooms with walk-in showers, hot tubs, and proper lighting.
• All Season Rooms: Another popular renovation that may yield a great return on your investment: enclosing the patio. Creating an all season room can add usable square footage to your home that will really appeal to buyers. Enjoy all the benefits of being outdoors in the summer — minus the bugs — and take in the beauty of a fresh snowfall while staying cozy in the winter.

Efficiency Projects

This may seem counterintuitive, but many home improvement projects that are necessities, such as roofing, electrical and plumbing updates, and new windows, won’t add as much value as a kitchen or bathroom renovation from a real estate point of view. “Sometimes people will say, ‘I just spent $10,000 on a new roof. Doesn’t that add value to my home?’ Well, that’s not going to help your value because you needed a roof,” Carmen explained. Windows and heating updates fall into the “efficiency” category, too. If you’re focusing on adding value, these projects may add a bit of curb appeal to the property and enhance its overall attractiveness to potential buyers, but they won’t yield the same type of return on your investment like a kitchen or bathroom update. (This doesn’t mean you shouldn’t pursue these projects. These are just factors to consider when prioritizing your list of renovations).

Interior Updates vs. Curb Appeal

What if the exterior of your home could use a little (or more than a little) TLC? You know kitchen and bathroom renovations add the most value, but buyers see the outside of the home before anything else. Does it make sense to start working on the outside first?

Carmen offers insight into this age-old kitchen table debate. “I was refinancing someone’s mortgage, and we had an appraisal done. The borrower was very disappointed in the value. He said ‘I just spent $10,000 putting a new retaining wall around my property. Did I get any value for that?’ It’s a shame, but the appraiser really didn’t give him any value for that. Those types of projects add curb appeal, but until you know what’s on the inside, the outside doesn’t matter as much.”

So the bottom line is: in most cases, renovate the interior first.

Financing Your Project

Home improvement projects are among the many reasons people refinance their mortgages. (Other reasons to refinance include: lowering your monthly payment with a lower interest rate, consolidating debt, financing your children’s education, or financing your own education). Your banker can help you determine which type of refinancing will work best for you:

• Cash Out Refinance — Using the equity in your home, the cash out refinance is a great way to finance home improvement projects.
• Rate-and-Term Refinance (also called the Limited Term Cash-Out) — Refinancing the mortgage on your property. This may be a good option for someone who purchased a home with a limited down payment, and is carrying private mortgage insurance. If the homeowner made major improvements to the property, such as renovating the kitchens and bathrooms and/or putting an addition onto the home, a new appraisal may deem the home is worth more than they paid for it. A rate-and-term refinance can lower their interest rate, and save them money because they won’t be paying private mortgage insurance any more.
• Refinance to a Shorter Term Mortgage — Depending on your situation, you may want to consider refinancing your mortgage to a shorter term in order to get a better interest rate. Your mortgage payment will increase, but you’ll save money in the end because typically there is a quarter to a half percent difference in interest rates between a 30-year and 15-year mortgages. If you find that your income has increased, or you have more disposable income because your children have become financially independent, this could be a great option for you.

Options

If you’re thinking about refinancing your home, it’s important to know your options. “When I’m working with someone on a refinance, I’ll show them what it would cost for a 30-, 20-, or 15-year mortgage, and we’ll discuss what the best choice is for them,” Carmen said. Consider what your long- and short-term goals are, too.

• Are you looking for the lowest payment possible?
• Are you interested in buying a larger home?
• Are you downsizing to a smaller home?

“Everyone has different needs and we ask these questions because it’s our responsibility to give them options that will best work for them,” Carmen said.

Do Your Homework.

Sometimes there’s a disparity between what you think the value of your home is, and what an appraiser may estimate the value to be. This can pose a challenge during the refinancing process if you aren’t prepared. “When we refinance, we need to have an appraisal done, and we do a full mortgage application,” Carmen said. “Do some research to get a sense of what your home is actually worth. There are a lot of online tools available now. Zillow is a great place to start. You can search the value of your home, and it will give you a ballpark figure to help you determine the value of your home.”

Fidelity Bank’s website is a great resource, too. “It gives you a lot of information on the financial information that will be required when you want to refinance,” Carmen said. “For example, we’ll need W2’s, tax returns, and pay stubs to verify your income. If you’re paying closing costs or buying a house, we have to verify where the down payment is coming from. We have to make sure the monthly payments are affordable.”

Plan for Success

“The internet is a great resource, but at the end of the day, you should come to Fidelity and meet with one of our universal bankers, or our mortgage consultants, to discuss what your long-term goals are,” Carmen said. “It may not be something that will happen in the next 30 to 60 days. It might be something we can do 6 months or a year from now.”

For clients who need help making a plan to improve their credit score, build up their savings, or pay off debt before they can buy or refinance a home, Fidelity bankers will help create a plan for success.  “That’s one of the things we really take pride in here at Fidelity. We’re looking for relationships, not transactions,” Carmen said.

Fidelity Bank’s Home Loan Sale

Through May 31^st, 2019, Fidelity Bank is offering special interest rates on home equity loans. Featuring affordable monthly payments and a guaranteed approval within 5 business days*, your Fidelity banker can help you turn your home improvement vision into reality. Click here to learn more!

Questions?

Fidelity Bank has multiple local branch offices throughout Lackawanna and Luzerne counties, and our full-service Customer Care Center is at your service 7 days a week. Call or visit your local branch office today.

Daniel J. Santaniello, President and CEO, of Fidelity Bank, publishes Financially Fit with Fidelity, your guide to financial well-being, every Thursday. If you’re interested in a financial topic we haven’t yet covered or want to subscribe to our emails, please feel free to drop us a line at blog@fddbank.com. We would love to hear from you.

* Guarantee of loan decision is within five (5) business days pending receipt of complete loan application including signatures of all borrowers, signed disclosures, and all necessary financial information. Restrictions apply on loans greater than $500,000.00. Not a guarantee for an extension of credit. Please see a Fidelity Banker for more details.