There was a surge in home improvements during the early days of the COVID-19 pandemic because millions of Americans were trapped at home with little to do. But many of those improvements were cosmetic, such as updated kitchens or bathrooms.
Today, many important home improvements and repairs are not being done. A survey by finance company Figure found that more than six in 10 new homeowners are delaying needed repairs to their homes because of a lack of money.
Some of these needed repairs are important structurally and should not be postponed, experts say. A roof leak, for example, will only get worse over time. Damaged or ineffective gutters will cause water to collect around the foundation and cause expensive damage.
Bill Dallas, president of Finance of America Mortgage, says he believes the home improvement trend will continue because the nation’s housing stock is getting old, homes are continuing to rise in value, and interest rates are still relatively low.
“That said, many of those who seek out funding for home improvement projects are working to address major issues that need to be addressed in their homes,” Dallas told ConsumerAffairs. “In this case, I’m referring to critical projects that may require immediate attention, either from a safety, code compliance, or basic functionality perspective.”
These projects include things like changing out a broken HVAC system, replacing the roof, or upgrading outdated plumbing and electrical systems. These projects have two things in common: they are vital to the structural integrity of a home, and they are expensive.
Using equity to pay for repairs
Fifty-seven percent of the homeowners who were surveyed indicated that they would use savings to pay for any repair projects. Dallas says another option is to tap the equity of the home.
“In my opinion, given the record $9.4 trillion in tappable equity, many homeowners could benefit from a cash-out refinance or a HELOC (home equity line of credit) to access funds that can be put toward home improvements if they don’t have the savings or the cash on hand,” Dallas said.
According to Bankrate, home improvements are the single best use of a home equity loan. That’s because the additional debt is being used to add value to the home or to prevent a loss of value.
Under recent tax law changes, the interest deduction on HELOC loans has been limited to expenses to improve the home that secures the loan. Using the loan to buy a boat doesn’t provide a tax break, but replacing a roof does.
ConsumerAffairs has gathered useful information on HELOC loans here.