With the economy in recovery, homeowner confidence is returning and we are seeing a marked increase in remodeling activity. But many homeowners are surprised to find that, even with excellent credit scores and solid incomes, financing options for a major remodeling project are much more limited now. Before the recession, lenders routinely approved loans based upon the projected value of what a home would be worth after remodeling. No more; that lending practice is dead and not likely to return soon. The new reality is that lenders will not loan against the future value of your home. For most of us, that leaves the Home Equity Line of Credit (HELOC) as the only viable financing vehicle for home improvement projects. So here are a few tips on how to navigate the HELOC process. 1. Shop carefully for the best lender: The amount of equity you can tap is restricted by the lending institution’s Loan to Value ratio (LTV). Most lenders today work with an 80% LTV; meaning the maximum amount of total debt you may secure with your home is limited to 80% of your home’s appraised value. But Federal Credit Unions often have more attractive terms. Recently some of our clients have secured loans with a 90% LTV by joining a Federal Credit Union. Don’t assume that you can’t join; you may be surprised to learn how easy it is to qualify for membership. 2. Put your home’s best face forward: Appraisers are human and subject to the same emotions as the rest of us; they will reward a well kept home with a higher appraised value. Prepare your home as though you were having an open house to sell it. Remember the three “P” rule: pick-up, put away, and primp. A neat home seems larger and gives the impression of being well maintained. And don’t’ forget the yard – a good cleanup and mulching will go a long way! 3. Brief the appraiser: Meet the appraiser personally and tell him how much you think your house is worth and why. You know the quirks of your home and your neighborhood better than they do. Don’t be shy, but don’t be aggressive; just let them know what your research suggests. 4. Help the appraiser: If you have plans of the house, make a copy for the appraiser. At the least, have a copy of your survey plat available. If you know when your home was built, tell them. Make a list of improvements you’ve made since you purchased the house (descriptions only – not dollars). 5. Challenge the appraisal: If you don’t agree with the appraisal, speak up. Don’t bother if it is a small amount, but if it is significant you should contact your lender and ask how to challenge the appraisal. 6. Phase your renovation: Many of our clients use a strategy I call the Equity Bump. Essentially, this means focusing first on projects that will have a disproportionate impact on the value of the home relative to the value invested. Then the home will re-appraise for more and you can borrow against that increased equity for the next project. 7. Repeat as necessary. I am not an expert in financing, but I deal with it everyday on behalf of my clients. Let me know if you would like to have a more in-depth discussion of financing options. I’m glad to help if I can.

THEY DON'T BUILD THEM LIKE THAT ANYMORE!

I love that phrase.  It usually escapes from a new client, when we are touring another client's just-finished renovation.   Sometimes we're admiring an exquisitely crafted stair railing or mantelpiece.  Or it might be a lovely paneled portal or a fabulous cast iron grille.  My personal favorite was a pocket-screen-door, that disappeared into the wall, next to a front door.  In each case, my new client pauses and looks wistfully at some such detail and observes "They don't build them like that anymore."  It's the sort of detail that they don't expect to find in today's construction... except we've just built it!

 

That's one of the most satisfying moments for me.  I'm always so proud of our carpenters and architects, for refusing to give in to the myth that true craftsmanship is not achievable today; there's simply no reason why that should be so.  Instead, I'd argue that given the enormous technological advances of our time, homeowners should expect new renovations and additions to be both designed and constructed better than an older home.