Home Improvement

Home improvements can range from kitchen and bathroom renovations to roofing, windows, HVAC upgrades and additions. Depending on the size and timing of your project, homeowners may consider several ways to pay for improvements, including savings, a home equity loan, a HELOC or mortgage refinancing.

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 vs. Curb Appeal

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).

Financing Your Project

Home improvement projects are among the many reasons people refinance their mortgages and take out Home Equity Loans. (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.

• Use Your Home Equity – There are several ways to leverage your home’s equity. Here are some options:

  • Home Equity Loan: Often used for significant expenses like home renovations or education, this option provides a lump sum at a fixed rate.
  • Home Equity Line of Credit (HELOC): This flexible, revolving credit line works similarly to a credit card, allowing you to borrow as needed up to a set limit.
  • Fixed-Rate HELOC Option: Lock in a portion of your variable rate HELOC to a fixed rate for more predictable repayments. 

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.”

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.

Questions?

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

* 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.