The Affordable Dream Home: Myth or Reality?
One part of the American dream is undoubtedly living comfortably in the home of your dreams. But exactly how attainable is this? It may be closer than you think. In fact, it may be only a modest mortgage and a home equity line away.
But before your hopes float too high, be forewarned: unlike the Hollywood version of this story, the real world American Dream does not happen overnight. And no, you cannot TiVo to the good part of this story.
So, where do you begin? First, when shopping for your new home, keep your idea of the perfect home close at hand, but keep your realistic idea of your future closer. Think about what stage of life you want this property to house. Furthermore, this mentality should apply not only to the aesthetics of properties, but also to the financial side of home shopping. Remember that while a home that is too small may result in a smaller mortgage, it will also lend itself to lower price appreciation and home equity. However, trying to buy a home that is too large could potentially end, not in ownership, but rather, in foreclosure. Finding a happy medium is the key to being a happy homeowner.
Before you start knocking down walls, be sure you know where the funding for your renovations will be coming from. Home remodeling is an excellent opportunity to use the equity established in your home to fund a project that could potentially increase your home’s value, and therefore, further increase your home equity. However, note that if this is your preferred source of funding, you must wait until you have paid off enough of your mortgage to tap into your equity or until your property has increased in value.
Plan your remodeling not only around improving your daily life, but also around increasing your home’s market value. There are a number of sources available on the Internet that can help you decide which renovations can get you the most value for your buck. For instance, updating a kitchen typically adds more to a home’s fair market value than adding something more basic.
Even if you don’t plan on selling your home after completing your home equity-funded remodel, by increasing your property’s market value through various home improvements, you will have access to larger home equity loans and lines of credit which can be used to finance the purchase of a car, in financial emergencies, or additional home remodeling projects.
When you’re ready to begin transforming your modest abode into the home of your dreams, be sure to hire professionals and ensure that experience is on your side. How many of us have watched countless hours of home improvement shows and convinced ourselves that we could produce improvements of the caliber only to find that there were very obvious reasons why we keep our day jobs? Honestly, we’ve all been there. But like opera singing, cosmetic waxing, and brain surgery, remodeling your home to increase your equity may be a task best left to the professionals (or at least, the very experienced). It’s always a good idea to ask friends or family for referrals and to use state licensed contractors.
With these basic ideas in mind, you can get one step closer to making the cherished American dream your reality.
Source: Informa Research Services