Despite having large equity reserves in their homes, many owners will undertake home improvements expecting to use savings or credit cards.
Discover Home Equity Loans surveyed 1,203 American homeowners and found that 52% are planning to undertake improvements over the coming 12 months and 25% expect to do so in the next 3 months.
Most (82%) of respondents agree that the home they own is a financial asset, with 47% saying the top reason they purchased their home was that it was a good investment, and 22% wanting to start building equity.
Four in ten owners said they want to make improvements to increase the value of their homes with kitchen and bathroom remodels leading the planned work.
Improvements cost more
When it comes to paying for their improvements, 64% believe it will cost them less than $15,000.
But according to remodeling.net, bathroom remodels are typically in the range of $19,000 to $61,000 while kitchens range from $63,000 to $125,000.
“Home improvement projects can quickly add up and oftentimes cost more than someone anticipates,” said PK Parekh, senior vice president of Discover Home Equity Loans. “Which is why people should be financially prepared and determine which payment method makes the most sense within their own financial situation.”
Paying for the work
More than a third of respondents would rather pay for improvements with cash while 23% would opt for using their credit card.
Only 38% said they would consider using the equity in their home, despite 46% having more than $100K available.
Among those that would tap their home equity, 18% would use a HELOC, 13% a home equity loan, and 7% a cash-out refinance.