At some point in life, you’ll want to improve some inconvenience in your home. It might even be a lingering problem that should be re-engineered rather than repaired. However, there are times when your family’s income might not be able to pay for the improvements you want to make. Different stages in your life also pose different challenges to your lifestyle and income. Our Preparing for Home Improvement Costs Series will examine a few of the problems you might face so you can anticipate and navigate home improvements in your future.
Marriage and Your First House
Many young newlyweds buying their first home make compromises on what they want, so they must decide on what improvements they can afford right away versus those things that can wait. Not surprisingly, many improvement projects are small scale.
For example, your single story ranch home might have a dark, dingy dining area. While the room would become totally killer with a pair of big skylights, a less expensive solution might be to install one or two extra ceiling light fixtures and slather on some lighter-color wall paint.
Thus, it’s important to prioritize the improvements you want to make in your home:
- What project will give you the biggest return value for the least cost?
- Weigh your needs with your long term plans for your home. As in, how long do you plan to stay?
- How much comfort and convenience will this improvement bring you?
- Will this improvement project cure ongoing maintenance problems?
- Could it add future maintenance for the home? (HINT: NEVER install a skylight on a roof situated under a walnut tree!)
Figuring Out the Budget
Often when young newlyweds consider how they’re going to pay for home improvements, they face some limitations in terms of credit and equity on their home. Small improvements such as new paint, some molding, or landscaping can be easily managed with credit cards. However, if you decide to tackle more expensive improvements (over $2,000) and you want an easily affordable loan, there are some helpful options:
- HUD’s Title I loan program works with local lenders to finance home improvements up to $25,000. (Any loan over $7,500 must be secured by a mortgage or deed of trust on the property.) HUD insures local lenders against loss. Applicants must have a good credit history and be able to repay the loan in regular monthly payments.
- HUD’s 203(k) Rehab Mortgage Insurance program lets home buyers and homeowners finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home. Title I can be used in conjunction with this. Costs must exceed $5,000, but they can include adding additions, energy improvements, modernization, and more.
Planning for the Unexpected “Uh-Oh!”
Like it or not, you should anticipate making at least one major repair to your home. No house is immune to problems – either sudden catastrophes or silent, creeping defects – and they happen when you least expect it.
Say you discover a rotten mudsill and banding joist. It’s an important piece of your home because it supports an exterior wall and repairing it can be expensive. Basically, you have three options:
- BAD IDEA — Do nothing, and live with the problem hoping it doesn’t get much worse (but it usually does). Unfortunately, if you ignore it, the defect will raise its head when you try to sell the house. You’ll very likely lose money from the sale or not find a buyer.
- BETTER IDEA — Live with the problem now, but start setting aside money to fix it in a year or two.
- BEST IDEA — Before you even know there’s a problem, set up an emergency fund right away and contribute to it monthly. Emergency funds help cover financial challenges your family will face in the future, including everything from home or car repairs to job layoffs. A good emergency fund is a stash of money that’s equal to 6 months of your living expenses, while an even better one equals 6 months of your income. Yes, it’s hard to do, but having it ready when life happens, like a major repair, will help you get more money when you go to sell your home.
What tips do you have for newlyweds and first-time homeowners about planning for home improvement costs? Share them in the comments!
Stay tuned for Part 2 of the Preparing for Home Improvement Costs Series as we discuss having your first child.