Home Improvement
Here are the best upgrades for resale and how to finance them.
High mortgage rates have more homeowners deciding to stay put instead of buying something else, but that doesn’t mean people are shying away from performing a little nip and tuck on their current abode.
Despite a 2 percent decline from the prior year, 56 percent of respondents to the 2024 US Houzz & Home Study say they made a home renovation in 2023. Further, they’re spending more than ever: The median home renovation spending level surged by 60 percent from 2020 to 2023, according to Houzz Research.
The Joint Center for Housing Studies of Harvard University has forecast an uptick in homeowner expenditures for improvements and repairs through the first half of 2025.
While cash from savings remains the most popular way to pay for a home renovation, there are still other ways to afford an upgrade. But experts caution owners to be pragmatic about paying for it with credit cards or by taking out a home equity line of credit (known as a HELOC).
“If you’re financing improvements, those improvements should be investment-wise, and they should not be things that you’re trying to do that are very taste-specific to what you want,” said Chen Zhao, senior manager of the economics team at Redfin.
Renovations can be viewed as investments in your home. So, which upgrades can boost your property value? New garage doors, replacing the exterior siding, doing a mid-range kitchen remodel, replacing your windows, undertaking a mid-range bathroom remodel, and putting on a new roof typically do, according to Zillow.
But what changes aren’t going to receive the Suze Orman stamp of approval?
Turning extra bedrooms into walk-in closets, garage-to-bedroom transformations, swimming pools, and opulent bathroom upgrades don’t see a return on investment, per Zillow. So, if you’re looking for vanity projects like replicating Candy Spelling’s infamous trio of gift-wrapping rooms at Spelling Manor in Los Angeles, it’s more financially sound to fork over cash rather than go into debt. Upgrades with broader interest, such as elevating your home’s curb appeal, can boost your property’s value at resale and make more sense as a contender for financing via HELOC or other means.
“If you want to put in a high-end designer chandelier or something like that, that’s not something a buyer would probably want to cough up [more money] for,” Zhao said. “That’s something that I probably would not borrow against the value of my house.”
Renovations are often funded by a variety of means, but cash remains king: Savings remained the leading funding source at 83 percent for renovations last year, according to the Houzz study. But credit card usage jumped 9 percent to 37 percent of renovations. Secured home loans (14 percent), cash from a home sale (12 percent), and gifts or inheritance (6 percent) rounded out the top five.
Another option is a cash-out refinance, when a homeowner takes out a higher mortgage to pay off the existing loan and gets the balance in a lump sum of cash. This measure is more appealing when mortgage rates are lower.
“Home equity loans are still the main ways people are thinking about this,” Zhao said. “In the current interest rate environment, there’s just not a lot of folks for whom a cash-out refinance really makes sense, because you don’t want to give up that low interest rate and take that higher rate.”
But what if you take out a HELOC? How much money should you take out? Zhao said underwriters typically won’t allow a homeowner to have a loan-to-home value ratio exceeding 80 percent. For example, if 70 percent of your home’s value is currently wrapped up in a mortgage while the remaining 30 percent is equity, you’ll be able to tap into only a third of that equity sum for funds to use in a renovation.
The Houzz study said homeowners pursuing pricier renovation projects — between $50,000 and $200,000 — utilized a diverse batch of funding sources compared to those pursuing lower-cost projects.
But not everyone has the savings or the home equity to fund these projects.
Lower-income households and households of color disproportionately reside in housing in need of upgrades. There are other options beyond savings, credit cards, and HELOCs for these homeowners — but these options are often underfunded, according to the Harvard’s Joint Center.
The US Department of Housing and Urban Development’s Community Development Block Grant Program, the HOME Investment Partnerships Program, and the US Department of Energy’s Weatherization Assistance Program are the largest federal sources for home repairs, while organizations like Habitat for Humanity and Rebuilding Together offer charitable home repair services.
Experts note government or nonprofit programs for home repairs often zero in on energy efficiency or getting a home to basic habitability instead of more cosmetic touches like a kitchen upgrade or curb appeal. This aligns with data that show lower-income households are much more likely to pursue replacement projects than discretionary improvements, said Sophia Wedeen, a senior research analyst at Harvard’s Joint Center.
Habitability improvements mean measures like removing health hazards such as lead paint from older homes but can also mean accessibility retrofits. Further, while a low-income homeowner might not be able to fund an entire kitchen renovation on public funds, there are federal grants to subsidize the purchase of energy-efficient appliances. Further, public funds can finance a variety of home improvement purposes.
“It could involve replacing an outdated HVAC system. It could also mean improving a home’s insulation, which then means that a family isn’t cold during three months of the year,” Wedeen said. “That’s a habitability issue. That’s a healthy homes issue, and it’s being funded through Weatherization [Assistance Program] dollars. So many of these interventions will serve a lot of different purposes. Even if the money is being directed toward one specific target, like improving home energy performance, they often have all kinds of ripple effects that can have a positive impact on households.”
But the Harvard study notes underfunding in federal and civic programs limits their effectiveness. For example, there are 8,000 income-eligible homeowners and an additional 18,000 eligible renters for a municipal home repair program in Little Rock, Ark. But only 50 home repair loans are approved each year for the program, per the Joint Center’s report.
While much of the legislative focus is on creating new housing, maintenance and updates to the nation’s existing homes is critical.
“There’s momentum growing in the policy space,” Wedeen said. “With the housing stock the oldest it has ever been on record, and with so many households being so cash-strapped, there’s a growing appreciation for the fact that this is an environmental issue. This is an environmental justice issue, a health justice issue, and part of the affordability crisis.”
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