Turn to equity for home improvements

Winter is on the horizon and now is the time to start considering home improvements that help lessen the severity of the cold and snow.

Almost everyone has lived at a place where insulation was poor and drafts were common. During the cold months, these aspects make it tough to keep the heat inside and you feeling comfortable.

And you can't forget about the financial effects of poor insulation as well. Your home's poor ability to keep heat inside translates to higher utility bills during the winter because you set the thermostat to a higher level to compensate for the cold.

Poor insulation and other parts of your house will have to be fixed one day. Luckily, there's a method available for you to use to help you afford these fixes.

Using equity

From the day you move in, your home builds up value. Home equity is therefore the value of ownership that is an indication of your property's current market value.

For example, imagine you took out a mortgage for $160,000 for a $200,000 home (assuming you put down 20 percent). This means your equity is $20,000. A few years later an appraiser says your home is now worth $300,000. Now, subtract the amount you still owe and you can find out what what the equity is.

You can then take out a home equity loan that usually comes with a fixed interest rate.

InsulationNew insulation may be required to keep your home warm.

Why you should use equity

Let's face it: Home improvements can be an expensive endeavor. According to Home Advisor, the average cost to install blown-in insulation is $1,346.

If insulation is the only improvement, perhaps the cost isn't as bad. But other factors could also be making your home more uncomfortable. Windows may not be properly sealed or the roof may have structural damage.

For a growing family, these expenses can quickly add up. Dipping into the emergency savings account may not cover everything and you want to stay away from relying too much on a credit card.

Taking out a home equity represents a suitable way to cover the costs of home repairs and improvements.

What should I focus on?

Poorly insulated homes can be the result of a combination of factors. To get an idea of what improvements you may need to focus on, you'll want to figure out what type of insulated home you reside in.

According to Shrink That Home, three types of homes are common.

The first is the leaky home, and as its name implies, this is a structure that doesn't hold heat well. Meager loft insulation, uninsulated flooring and single-glazed windows are common in leaky homes. Combined, these factors will make a significant dent in your wallet.

Modern and passive homes are well-suited to handle the harshest of winters, as they are equipped with suburb insulation and double- or triple-glazed windows.

Utility costs for leaky homes can be as high as $1,500 annually but possibly only $100 for passive houses.

"You only want to use equity for the home repairs."

Understand everything you can

If you've made the decision that a home equity loan is needed, contact your nearest Landmark Bank to inquire about more information.

Since you're essentially taking out a loan, you'll also want to understand all aspects of the loan, from the interest rates to how much you'll be paying monthly.

Above all, you only want to use equity for the home repairs. Don't take out more than you need to spend on other items. Equity is one of the most helpful financial tools you have available, but you have to use it appropriately.

And one of those reasons is to fix up your home.

For more information about smart ways to manage your finances, contact Landmark Bank.

Back to Blog