Home remodeling: 6 questions you should be asking
Many homeowners aren’t currently thinking about moving. They are, though, thinking about remodeling their current home.
Nearly two-thirds of homeowners are somewhat likely to remodel, with millennials being the most likely. A whopping 19 percent of these millennials say they’ll use credit cards to fund these remodeling projects – a high-interest option. This is all fine if you pay off the balance immediately, but not if you carry it over from month to month.
A home equity loan or line of credit lets you use the equity in your home as collateral, giving you a lower interest rate. In fact, when you get one of these loans from Arsenal, you pay no closing costs*, saving you anywhere from $500-$1,500. You can also borrow up to 100 percent of the equity you’ve built up in your home. Very few other financial institutions let you do this.
But, before you begin looking for financing for a remodel, here are six questions you should be asking.
1. Are we talking about the same thing?
Be prepared by choosing a well-liked and trusted contractor. Choosing the right contractor is the single most important decision that homeowners make on a remodeling project.
Make sure that you and your contractor are clear about cost estimates. Oftentimes, a contractor’s concept of a “worst-case-scenario” cost can be different than yours. Always tell your contractor what your assumptions are.
2. Did you experience cost overruns?
Talking to references is the best way to learn whether a contractor routinely underestimates projects, either out of optimism or as a ploy to get the job. Ask them, “I’m concerned that the price of my remodel will change a lot during the job. Was your final cost much higher than the quote?”
3. Did subcontractors view the job and provide estimates?
A good general contractor will get firm proposals from all the trade subcontractors. To do this, the trade subcontractors should visit the site with the general contractor before they provide their proposals and before the job starts.
4. Can you put that in writing?
When the contractor creates a written contract with firm quotes from subcontractors, the final cost should only vary about 3 to 5 percent. The contract should specify that if things go wrong, the contractor will absorb any additional cost.
5. What’s happening?
Asking questions throughout the project is part of the homeowner’s job. By talking to the plumber, you may learn that it’s possible to turn a large linen closet into a laundry area at minimal cost, compared with the total price of getting the laundry out of the basement. Asking questions can also clarify other choices, especially when problems occur.
There will be problems and surprises, so it’s good to know ahead of time how your contractor will tackle them. Does he or she deliver solutions quickly and help you decide the best way to proceed?
6. Are you planning on selling in the future?
What if you do plan to sell your home? Remodeling your home is a great way to add value to your property and get more money when you sell. Make sure not to overspend though. A new garage door or minor upgrades to your kitchen can get you the most bang for your buck. A brand new kitchen may look awesome, but you may not see as much return for it.
We’re here to help
If you’re planning to remodel, ask us how a home equity loan or line of credit can help you turn your dream project into a reality.
*ACU may pay closing costs for home equity loans or lines of credit. If the borrower repays the loan within the first 12 months, the borrower must reimburse the credit union for the closing costs.