Remodel, Refinance or Both? A Homeowner's Guide to Property Value and Livability

Taking a walk through my neighborhood yields For Sale signs on more than a dozen homes, and sadly many of them are homes that have been on the market for a year or more. In the continuing housing market slump, more homeowners across the nation are electing to stay in their properties and remodel or refinance instead of putting their home on the market.

The initial crash and slow rebound of housing values is simply making it too expensive for homeowners to "sell up" as they have in previous years. My husband and I, for example, purchased our home in 2007 with the intent to live in it while the equity grew and then sell or lease the home for a profit. Our plan to take valuable equity from one property to invest in something newer, bigger and brighter has been thwarted by the national housing crisis and left us without the equity we had hoped for.

Like us, many homeowners are rethinking their property investing and overall financial plans and seeking new options in the quest to live more comfortably. Eavesdrop on any conversation discussing residential property and you're apt to hear the new question on every homeowner's mind: "Do I remodel, or refinance?"

Remodel

If you happen to be blessed enough to own a home in decent condition in an area where homes are still selling, then you've won half the battle if you're considering putting your home on the market. We are in the midst of the most heavily weighted buyer's markets that our generation has seen, but luckily some areas are still growing and bouncing back from the real estate crisis more quickly than others.

But if you decide to sell, there is still a lot to consider. Because of the number of properties on the market, even in rapidly growing areas, for you to slap a "Sold" sticker across the realtor's face on your "For Sale" sign you may need to remodel and update your home to make it stand out from the other properties in the area.

Not only can a remodel make your home more appealing to potential buyers, but you may even get some sweat equity out of the bargain. Realtors and housing experts will tell you that a kitchen or bath remodel can go a long way to attracting buyers, but any project that makes your home more updated and livable can yield great results.

Before you start calling contractors and flipping through the pages of a DIY home remodel book, contact a realtor and schedule a time for them to come and do a walk through of your property. Invite them to make a list of any areas they see that might turn-off buyers and then focus your remodel budget on fixing those issues before undertaking a full redesign of your property.

An added benefit to doing a remodel is that if you do end up with your home on the market for an extended period of time, you will find that your home will be more comfortable and livable in the meantime. And who knows, once your remodel is complete you may decide that you really do enjoy your home after all and decide to stay until the market comes back.

Refinance

In a neighborhood like mine it's apparent that no mater how extensive the remodel, no homes on the market are changing hands. A neighbor up the street from us put their home up for sale nearly a year ago and after the property sat for several months they opted to do a full remodel; replacing all the floors, installing an upgraded Air Conditioning unit, completing a kitchen remodel and upgrading the interior and exterior of the home. Many thousands of dollars and several months later, the home is still on the market.

Sadly, my neighbor's plight isn't unique and we homeowners are all realizing that we may be living here (or "stuck" here depending on your pessimism) many months or years longer than we had originally intended. Suddenly the great mortgage deal that we struck several years ago seems unmanageable, particularly for those homeowners with adjustable rate mortgages.

Luckily, if your home is well maintained and you owe roughly what your home value is worth (preferably you owe a bit less than its worth) mortgage refinance rates are better than they have ever been. If you are approved for a mortgage refinance with a lower fixed interest rate than what you are paying on your current mortgage, you may be able to save hundreds of dollars a month without lengthening the term of your loan. Even if your rate is projected to drop as little as 0.5%, you may end up saving thousands of dollars in interest payments each year depending on the size of your mortgage.

Both?

For many of us, staying where we're at is a life choice that the economy has made for us; and we might as well make the best of it. For Mr. Kawaii and I, that means taking advantage of the benefits of mortgage refinance as well as remodeling. Sure, we still plan to someday sell this home and buy a pretty yellow house in the country with enough land for a flock of ducks and a porch for our dog to sleep the day away on. But in the meantime we are going to enjoy our home to the fullest by remolding it to suit our tastes and applying for a mortgage refinance to make living here a bit more cost effective.

Taking the initiative to refinance and then reinvesting the money you save into a remodel to make your home feel a little bit more like a place you don't mind laying your head pays back dividends. Not only can you save money and build sweat equity, but the more you invest in choices to improve your property the more you will benefit from the pride of ownership while still feeling like you're ahead of the game.

Want to read more like this? Click the links below!

My Personal Experience with the Housing Market Crash

The Positive Recession

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