If you are preparing to sell your home, you’ll want to do everything you can to get the highest selling price possible. While much of your resale value depends on your home’s neighborhood and the housing market, you can control the updates and renovations that take your home from merely market price to above-asking.
If renovations are part of your home sale plan, using a home equity line of credit (HELOC) can help you increase resale value without incurring large monthly payments before the sale. And with lower interest rates than most unsecured personal loans or credit cards, a HELOC lets you borrow at a competitive rate.
During the HELOC’s draw period (which can last up to 10 years), many lenders will allow you to make only interest payments against your HELOC balance. While you can pay off the HELOC in full with the proceeds from your home’s sale, you’ll be able to enjoy low monthly payments on your borrowing as you renovate until the sale is closed.
The unique borrowing flexibility of a HELOC — combined with borrowing limits that can match any renovation budget and interest-only draw periods that can last up to 10 years — make HELOCs an ideal match for homeowners that want to get the most from their sale.
Repairs and Renovations Worth Considering
Whether you’re updating a bathroom or installing a new roof, there are very few restrictions on the way that you can use a HELOC to improve your home. However, there are some repairs and renovations that will give you a bigger return than others.
Some of the best ways to utilize your home equity line of credit to prepare your home for a sale and to increase your potential sale value include:
Kitchen Remodel – An outdated kitchen can make or break the sale of a home. Although overhauling a kitchen is one of the most expensive undertakings, it also has the largest return. Even a minor upgrade can see a return of over 70% of what you invest in a kitchen update.
Roof Replacement – Leaky, old roofs will leave your home sitting on the market. With a 60% return, making sure your home has a new roof before you sell it is a good investment.
Bathroom Remodel – Much like kitchens, an outdated bathroom can drag your home’s sale price down. Since even moderate bathroom upgrades can give you a hefty return, it’s usually the room that experts recommend splurging on the most.
New Deck/Porch – Many homebuyers are looking for curb appeal and outdoor space. If you have room to create an outdoor sitting area, your home’s asking price will benefit. On average, a new deck will earn up to 65% return-on-investment.
Garage Door – Considering that adding a new garage door gives you an almost 100% return, there’s no reason to ignore it. Whether you choose a new metal door or a composite door, refreshing it will give your home some extra appeal as an immediate signal to homebuyers attending your open house.
Attic Bedroom – Turning the unused attic space into a converted bedroom is a way to use your home equity line of credit to your advantage. Attic conversions can see a return of 95% or greater, and sellers are willing to pay for an extra bedroom.
When you take advantage of the low-interest rates offered by home equity lines of credit, you can turn your home into the best listing on the block. And with the flexible terms of a HELOC and low monthly payments during the withdrawal period, you don’t need to break the bank to do so.