If you own your home long enough and it appreciates in price, you may reach a level of equity that allows you to borrow against your home. If you do get a home equity loan or line of credit, you can use the money for whatever you want -- to pay other bills, take a vacation or start a business. But another good use of your home equity is to invest it back into your home to increase its overall value.
How To Tap Your Equity
To get a home equity loan or line of credit, you usually need to have more than 20 percent equity in your home. That means, for example, if your home is worth $200,000, and you owe $150,000 on your mortgage, you would be able to borrow $10,000 against your home equity. The only way to know for sure that you have enough equity is to do an appraisal, which is something that a lender will do if you go through the loan process. It's a good idea to talk with a professionals like those at GE Credit Union to get the process started.
There are a number of interior improvements you can make to your home that will significantly increase its value. For example, minor kitchen and bathroom remodels have some of the best returns on investment. These can involve things like replacing counter tops, flooring and plumbing fixtures. Other good interior renovation projects include adding a bathroom and converting unfinished space, such as an attic or basement, into a usable room.
Many homeowners only focus on their home's interior when doing improvements and forget about the outside. But exterior improvements are some of the best you can make in terms of adding value and getting a return on your investment. Landscaping improvements, such as planting trees and shrubs, are one of the few home projects you can do that actually add more in value to your home than what you spend on them. Other good exterior projects include replacing your entry door and garage doors, fixing up or adding a deck and replacing or adding siding.
Tapping the equity you have in your home to make home improvements that will increase value can be a good decision. However, you have to weigh the pros and cons to make sure you are making the right decision. Above all, you need to make sure you can afford the additional monthly loan payments.
About the Author: Lizzie Weakley is a freelance writer from Columbus, Ohio. She went to college at The Ohio State University where she studied communications. In her free time, she enjoys the outdoors and long walks in the park with her 3-year-old husky Snowball. The information in this article is credited to General Electric Credit Union.