Tips for Homeowners on Adding Value Through Home Improvement

TROY, MI — With homebuying becoming increasingly competitive and the nation’s housing stock aging, a new Bank of America Homebuyer Insights Report found that more people are customizing their current homes with a focus on increasing enjoyment. Over 60% of homeowners, ages 18-43, plan to renovate their homes this year. And while homeowners see many design ideas they’d like to try, acquiring the funds for these projects is often the missing link.

Area Lending Manager at Bank of America Michigan, Nash Arabo, answered questions about how homeowners can take their home improvement plans from dreams to reality.

Q, How can homeowners pay for renovations?

A. Most homeowners tell us they plan to pay for significant renovations using some combination of money in savings (62%), a home equity line of credit (HELOC) (32%), a credit card (24%) or money invested in the stock market (18%). Pairing savings with other financing options can give you the funds you need to accomplish your goals.

Q. How does a home equity line of credit (HELOC) work?

A. A HELOC is a revolving line of credit available to you based on the equity you have in your home. HELOCs may have lower interest rates than other loans.

Q. How do you qualify for a HELOC?

A. To qualify for a HELOC, you need to have enough equity in your home. Typically, you can borrow up to 85% of your home’s appraised value minus what you still owe on your mortgage or other loans secured by your home.

Q. How can prospective buyers weigh whether a fixer upper is the right choice for them?

A. In a competitive housing market, fixer uppers typically come with a lower initial cost, allowing you to keep your monthly mortgage payments low and save up for renovation costs over time. They can also allow you to invest some of your own time, labor and materials and create your own home equity. There are many varieties of fixer-upper houses as well – some just require cosmetic updates like carpet, paint or flooring. Other fixer-uppers have major mechanical or structural issues. Before you consider buying a fixer-upper house, make sure that you understand exactly what needs to be updated and whether you have the time, skillset and money necessary.

Q. There’s no denying today’s market is very competitive. Is now a good time to buy?

A. There’s often a misconception that there’s a “right time” to buy. Regardless of the economic environment and uncertain times, consumers will always have a need or desire to buy a home. Beyond current factors, the best time to buy is when it makes sense in your life.

For those who have been consistently saving and are comfortable with their financial situation, there may be advantages to buying in the near term. There are also ways to help yourself compete for high-demand properties, like getting a mortgage preapproval before you shop.

Q. What is Bank of America doing to educate prospective homebuyers?

A. Our First-Time Homebuyer Online Edu-Series, which is available in English and Spanish, provides an easy-to-understand roadmap to homebuying. It allows you to go at your own pace as experts guide you through preparing your finances, making an offer, applying for a mortgage and more. There is also a section focused on affordable homebuying options for clients who are having difficulty saving for a down payment.

Q. What’s new with the bank’s Community Homeownership Commitment?

A. We are making steady progress toward our goal of committing $15 billion to help low- and moderate-income homebuyers. Since launching the commitment in April of 2019 we’ve assisted nearly 26,000 homeowners with over $6.6M in affordable mortgages.

On average, recipients using both our Down Payment Grant and America’s Home Grant have received about $14,000 toward the purchase of their new home.