Pay Off the Mortgage? Invest? Remodel? A Checklist for the Savvy Homeowner
Homeownership is a tricky business. The housing market is increasing hand over fist, making the purchase of a home a pricey proposition. Those who wish to buy a home must do so with care if they want to cultivate an asset that will reward them in the future.
The question is, how should you go about increasing the value of your home? Should you invest in an addition? Renovate older rooms? Pay off your mortgage as fast as you can?
There’s no clear answer to this question, and every situation is different. Use the three-step checklist below to gauge your current circumstances and figure out what savvy homeowner activity is best for your particular scenario.
1. Identify Your Remodeling Needs and Desires
No one moves into a house and finds that everything is exactly how they would want it. Even those with wealth invest plenty of cash into changing things within their living spaces.
Some of these adjustments relate to personal preferences. In other words, they answer a need or desire that you have as an individual living in your space.
But there are also many home improvement projects that can impact the value of your home itself. These tend to do two different things:
- They allow you to resell your home at a higher value, allowing you to recoup a portion of your original investment.
- They make your home more desirable, making it much easier to sell your home when the time comes.
It’s important to realize the distinction that these two advantages make. When you invest in your home, there’s a really good chance that you aren’t going to make double or triple what you put in when you go to sell the home in the future.
However, when you add the fact that your home will be easier to sell, the added value becomes much more desirable.
Of course, the tricky part is figuring out what areas of your home you should adjust in the name of investing in the future.
Take some time to research what areas of your home are worth renovating or remodeling. Use a trusted home improvement site like Angi, where you can get professional opinions.
Some projects are seasonal. Others focus on high-value areas of your home. Some take months to complete while others can take an afternoon.
If you want to truly invest in your home, you need to get a solid idea of where you can make effective home improvement efforts. Once you have a list of project candidates, move on to the next section.
2. Establish Your Finances
No, this isn’t referencing the need to create a budget. If you’re a homeowner, chances are you’ve had a budget for a while. It probably includes items like your mortgage, maintenance costs, utility bills, and so on.
However, along with month-to-month budgetary concerns, there are also ways that you can invest your hard-earned cash right in your home.
For instance, if you bought your home when mortgage rates were high, you might want to refinance. This can save you a serious chunk of change in the long run. But it does cost quite a bit up front.
In fact, refinancing costs are often compared to closing costs and can run into thousands of dollars. It might be worth it for your long-term finances, but you need to make sure you can handle the costs in the short term, as well.
You can also invest by paying your mortgage off ahead of time. Of course, the easiest way to do this is by paying a lump sum toward the principal mortgage whenever you can.
Another way to spread out this activity and make it more manageable is by signing up for something like biweekly payments. This involves making an extra mortgage payment once each year that goes to your principal balance and can save you a lot of interest down the road.
Many experts recommend this option if your finances allow for it. However, coming up with an extra thousand dollars or more every year takes some forethought.
As with your home improvement options, do your research and find the financial investment options that you prefer and that you can afford. Then create a list and move on to the next step.
3. Choose Your Priorities
At this point, you’ve considered the areas of your home that you want to significantly upgrade. You also separated pet projects from legitimate factors that can increase the value of your home.
In addition, you’ve gone over the financial activity that you can tap into to add more value to your home.
Once you’ve gathered your various investment options, it’s time to bring them together and set your priorities. Set each list side by side and consider what areas you want to invest in sooner, which ones you want to invest in later, and which ones are so low on your list that they can be put on permanent hold.
By curating a targeted list of options that resonate with you, you can create a home investment strategy that can go the distance.
You can approach each project on your list with the full focus of your resources, too. This avoids the temptation to spread out your efforts in a less effective manner.
It may take some time, but following the three steps outlined above can have a huge impact on how good of an investment your home turns out to be. By researching, prioritizing, and strategizing both your financial and project-based home improvement options, you can ensure that you remain shrewd and astute throughout your homeownership journey.