The ABC's of Home Improvement
Buying a home may be the American Dream, but the initial
purchase is only the introduction to that dream. There's always something about your house
that could be a little better, a little closer to perfect. Now, with a little planning,
you can bring your home closer to your dream of perfection.
Many home improvement projects begin with
someone in the household saying, "Wouldn't it be nice ...?" What follows may be
a wish for a remodeled kitchen or a room addition with space to accommodate every family
member's needs. However, reality usually intrudes upon this daydream: There's only so much
money and so much space. The trick is turning your dreams into reality. Start by
evaluating your needs. Most homeowners consider home improvements for one of these
- You need to update the out-of-date. If your
kitchen still sports appliances and decor from decades past, now may be the time to make
- You need to replace fixtures or appliances.
Sometimes a home improvement project grows out of an immediate need to replace broken or
inefficient fixtures. If the sink, tub or toilet has to be replaced, many people take the
opportunity to refurbish the entire bathroom.
- You're selling your home. You want to be sure
you'll get top dollar from the sale of your home, and that may be the rallying cry for
some home improvement projects.
- You're staying put. You thought about moving, but
now you realize that improving your present home is a better option.
- Your family has grown and you need more space.
Improving to Move or Improving to Stay
You need to evaluate your plans carefully if you're improving your home to put it on the
market. Cutting corners could hurt rather than help your prospects, but you don't want to
go overboard either. Potential buyers may not want to pay for the extras you have
included, so keep changes simple.
Also keep in mind that people viewing your house
may not share your tastes and therefore won't necessarily appreciate the time and effort
you put into finding just the right shade of green paint for the walls.
Improving to sell is easier if you mentally put
yourself on the other side of the proverbial fence: What is important to the home buyer?
Here's a list of remodeling projects that buyers are likely to find valuable:
- Adding or remodeling a bath
- Improving the kitchen
- Adding a new room
If you're remodeling in order to stay in your
home, you still need to avoid over-improving it. You'll probably sell someday, and even if
your house is the best on the block, you may have a hard time convincing buyers to pay
extra for the things you found so important. Keep the value of other homes in the area in
mind whenever you consider improvements. Your home's value should be no more than 20%
above the average. That means a $10,000 kitchen improvement project might be a better idea
than a $30,000 pool, especially if no other homes in your area have pools.
Unfortunately, some home improvement projects get started because something is broken. A
leaky plumbing fixture may be the first step to a major bath remodeling. After all, if the
tub has to be replaced, why not do the whole room? While that's certainly one reason to
remodel, you'll generally want to avoid basing your home improvement projects on immediate
need. Proper maintenance will help to minimize problems. Go over every part of your home
at least once a year. Check out the roof, plumbing, electrical wiring, etc. As soon as you
notice a problem, fix it. Early attention to repairs will help you avoid a larger expense
Let's face it, home projects can be expensive.
You may be tempted to tackle them yourself as a way to save money. For small projects,
that may be a smart move. You don't have to wait for someone else to fit your house into
their schedule, and you can take pride in doing the work yourself. Unless you're
particularly handy, however, large home improvement projects are better left to the pros.
If you're remodeling the kitchen, ask yourself if you can handle the plumbing, electrical
and carpentry work. And don't forget that you need to finish it all quickly, because in
the meantime you'll be without a kitchen.
Hiring people who have experience can save you
money and time, too. For example, these professionals can help you get a custom look using
stock products, and that can be a significant savings. Getting something done right--the
first time--will give you value that lasts for years.
Word-of-mouth is a good way to start looking for
home improvement specialists. Check with friends, business associates and neighbors for
recommendations. Always ask for at least three references - and check them out. Check,
too, with your local chapter of the Better Business Bureau. You can find the number in the
community services section of your telephone book. Make sure everyone is in agreement
about design, schedule and budget. Get the details down in writing in a signed contract.
You'd also be wise to check on professional certifications and state licenses, where
required, and insist that any contractors you hire are fully insured and bonded. Contact
your town or city Building Department for information. In particular, make sure
contractors carry workers' compensation insurance so that if any workers are injured on
the job, you won't be held liable. Ask for a copy of their insurance certificates. Also
make sure that you or the contractor secure any necessary permits before beginning the
work. Contact your local Planning and Zoning Commission for information.
Here's a quick overview of some of the pros you
may work with in remodeling your home:
Architect. These professionals
design homes or additions from the foundation to the roof. If you're planning structural
changes--adding or taking out walls, for example--or anticipate a complex design, you'll
probably want an architect. You may pay an hourly fee or a flat fee. Be sure to get an
estimate of the total cost: It can take 80 hours or more to draw up plans for a major
To find a certified architect in your area,
write to: American Institute of Architects, 11735 New York Ave., NW, Washington, DC 20006.
Contractor. This person oversees
the nuts-and-bolts aspects of your home improvement project, such as hiring and
supervising workers, getting permits, making sure inspections are done as needed and
providing insurance for work crews. You may wish to get proposals from one or more
reputable contractors, based on specific details of your project. Be sure each contractor
bids on exactly the same plan for comparison purposes. Once you've chosen a contractor,
make sure your contract specifies that you will pay in several stages
It's customary to pay one third when the
contract is signed so that the contractor can buy supplies. The number and timing of other
payments depends on the size of the job, but do not make final payment until all work is
successfully completed, inspected and approved. Call the National Association of the
Remodeling Industry (NARI) Homeowner Hotline at 1-800-440-NARI for a free copy of the
brochure Select a Professional Remodeling Contractor and a list of NARI remodeler members
in your area.
Interior Designers. These
specialists offer advice on furnishings, wall coverings, colors, styles and more. They can
help save you time (by narrowing down selections) and money (from the professional
discounts they might receive). When meeting with an interior designer, be sure to talk
about your personal style and preferences. Expect to pay anywhere from $50 to $150 per
hour, or you may negotiate a flat fee of perhaps 25% of the total project cost. For a
referral to local interior designers, phone the American Society of Interior Design at
1-800-775-ASID. Depending on the scope of your home improvement plans, finding funding may
be a project itself. If the project is small, you may be able to save for it from your
regular household budget. For larger projects, you'll probably need to borrow money.
If you participate in a 401(k) or 403(b) plan at
work, you may be able to get a short-term loan from your account. To find out if this
option is available to you and to learn about any tax implications, talk to your benefits
administrator. Another possibility is borrowing against the cash value of your life
insurance policy. If you're interested in finding out more about this type of loan, talk
to your life insurance agent.
To take out other types of home improvement
loans, head to your local bank, savings and loan, or credit union. Compare interest rates,
repayment options and penalties from lending institutions before deciding on one of the
This is a loan against the equity in your home. It is, in essence, an additional mortgage.
Typically, financial institutions will let you borrow up to 80 percent of the appraised
value of your home, minus the balance on your original mortgage. For example, if your home
is appraised at $100,000 and your current mortgage balance is $70,000, you may be able to
borrow $10,000 by way of a second mortgage. You may also incur all the fees normally
associated with a mortgage - closing costs, title insurance and processing fees. Talk to
your tax advisor about whether the interest on a second mortgage may be tax-deductible.
involves paying off your old loan and taking out a new mortgage on your home. To
refinance, generally you'll need to have equity in your home, a solid credit rating and a
steady income. You'll incur all the closing costs that go along with getting a new
mortgage, so unless you're doing extensive remodeling and can get a mortgage interest rate
at least two points less than you're currently paying, this type of loan may not be for
Home Equity Line of Credit.
Like a second mortgage, a home equity loan lets you tap up to about 80 percent of the
appraised value of your home, minus your current mortgage balance. Since it's set up as a
line of credit, you won't be charged interest until you make a withdrawal, but you will
have to pay closing costs. You can make withdrawals gradually as you start paying
contractors and suppliers. The interest rate charged is usually variable and may be based
on the outstanding balance. Make sure you understand the terms of the loan. If, for
example, your loan stipulates that you need to pay interest only for the life of the loan,
you'll have to pay back the full amount borrowed at the end of the loan period or you
could lose your home. The interest on home equity loans may be deductible; talk to your
Although the interest rates charged are often higher and you generally will not be able to
get a tax deduction for the interest paid, the costs of obtaining an unsecured loan are
usually lower. The relative ease of obtaining this type of loan makes it popular for small
projects costing $10,000 or less. The lender will evaluate your application based on
credit history and income.
Be House Smart
You'll be happiest with the outcome of a home improvement project if you plan carefully
and do your homework. Armed with the information in this brochure and a realistic idea of
your needs and budget, you'll find your home getting closer to your dream of perfection.
PAMPHLETS FROM THE FEDERAL GOVERNMENT
The quarterly Consumer Information Center Catalog lists more than 200 helpful federal
publications. For your free copy write Consumer Information Catalog, Pueblo, CO 81009,
call 719-948-4000, or find the catalog on the Net at http://www.pueblo.gsa.gov/.