Colorado’s growing economy, natural beauty, and lifestyle appeal have contributed to a steady increase in home values. This can create conditions ripe for home renovations for two important reasons. Firstly, current homeowners may find it makes more sense to renovate their existing homes, rather than face a tight real estate market. Additionally, that increased equity in homes can be converted into an affordable funding source to draw upon to make those desired upgrades.
Home renovations can help meet your changing needs, creating an improved quality of life. And with chilly, snow-filled winters that can stretch into spring, Coloradans need to make the most of their indoor spaces, making their homes welcoming places to wile away the long cold season. Whether you’re considering home improvements out of necessity or are looking to tailor your home for your needs and lifestyle, this blog can help you highlight key areas of focus for your renovations, as well as ways to finance your plans—easily and affordably.
Popular Renovations for Your Home in Colorado
Finishing Your Basement
When you’re looking for more space within the home so the entire family can spread out, basements can be the perfect choice. With proper insulation, subterranean spaces can become cozy nests in the winter and cooling spaces in the summer. What can you do with your unfinished basement space? Consider a:
- Gaming Room or Home Theatre
- Playroom or Rec Room
- Guest Quarters or In-Law Suite
- Workshop, Studio, or Makerspace
Regardless of how you use your basement space, be sure to go the extra mile to make it as comfortable as possible. If your basement is damp or subject to flooding, solve these issues first. Insulation, drainage, waterproofing, dehumidifiers, and supplementary heat sources (like stoves) can turn an unpleasant and unused part of your home into the new favorite space.
Updating Outdated Spaces
Kitchens and bathrooms can be the first spaces in your homes to feel outdated. Not only are there more fixtures in these areas that can show their age, but they also face more wear and tear with constant use. What are some common upgrades that can add value to you home?
Replacing or refinishing cabinets
Cheap cabinets aren’t built to last, and if your doors, drawers, and shelves have seen better days, it may be time to replace. However, if you have high-quality wooden cabinetry, it may be more cost-effective to refresh it with a new finish or more modern hardware.
Replacing your counters, sinks, and backsplashes
Hiring a professional to swap out counters can be quick and easy improvement, and if your cabinets are in good condition, possibly all you need to upgrade your space. Use this opportunity to replace your sink, faucet, and possibly your backsplash, too.
Changing your flooring and tile
Linoleum or cracked tile can be an eyesore, hard to clean, and unfortunately, can be a chore to replace. That’s why, when choosing to replace flooring or tile surrounds, pick a high-quality, timeless material—this can save you time and money in the long run.
Updating appliances and fixtures
A lot can change in even a decade, and new toilets, ranges, ovens, and refrigerators provide big savings on utility bills, as well as additional features you didn’t know you were missing. They can also offer energy-efficient rebates and instant modernization.
Making Energy-Efficient Upgrades
Home comforts go beyond appearances—a cozy, inviting home is one that is draft-free (and easy and affordable to heat!). If last winter’s heating bills left you shell-shocked, perhaps the best use of your renovation dollars is on upgrades that can reduce those utility costs. And with rebates, tax incentives, and assistance programs helping to offset the cost, your energy savings could cost a lot less than you think to achieve.
Cold spots in your home? Here are a few ways to address them:
- Added insulation or insulation replacement
- New windows and/or doors
- Storm doors (and windows)
- HVAC upgrades for better heat distribution
It may also be time to replace your heating and cooling systems:
- Replace inefficient furnaces and air conditioning units with energy-efficient models
- Replace gas or oil-burning furnaces with heat pumps
- Replace outdated and expensive baseboard heat with mini-split systems
Lastly, if you live in a sunny location, especially at a high altitude, consider utilizing solar to offset your energy bills. These could include:
Rooftop panels
Placed on the sunniest parts of your roof and connected to your electric supply, these are a space-saving method for incorporating renewal energy into your home.
Solar exterior lighting
Whether you’re replacing your existing lighting features or adding lighting to improve visibility and curb-appeal, solar lighting can be a cost-effective entryway into solar power.
Passive solar heating
Adding or expanding windows on the south-facing portions of your home can not only provide more illumination (and views!) during the day, they can also provide additional heat on sunny days. Just be sure to invest in curtains for the summer!
Maximizing Outdoor Living
With the unparalleled scenic beauty of our region and mild, pleasant summers, making the most of your home’s outdoor spaces is a must for Colorado residents. Whether your home offers glorious mountain views or is an urban oasis, there are many ways to improve your outdoor space.
Create an outdoor living room
Build new or improve your existing deck or patio to extend your living space beyond your walls. Consider adding shelter, from sunshades to roof structures, for protection against the elements.
Design an outdoor kitchen
If you love cooking or grilling, an outdoor kitchen can help you take your passion to a whole new level. Built-in grills, wood-burning brick ovens, sinks, and weather-friendly food prep spaces can be customized for your preferences.
Build an outdoor fireplace
Extend your outdoor time by bringing in an element of warmth, from masonry fireplaces to integrated fire pits. Choose a fuel source that best fits your needs: wood, natural gas, or even clean-burning alcohol.
Financing Renovations with Home Equity
In times of high interest, it often makes sense to utilize the equity in your home to help fund your renovations. Not only are interest rates for home equity lending products better than those of unsecured loans (like personal loans and credit cards), you may also be able to deduct that interest from your taxes.
What is home equity?
Home equity as the portion of a property that you, as the homeowner, truly own—the difference between the current market value of the house and the amount still owed on any mortgages or loans you have against the property. For instance, if your house is valued at $500,000 and you owe $300,000 on your mortgage, your home equity value is $200,000. Your home equity can grow in three ways: paying down your mortgage, home improvements that increase your home’s value, or rising property values.
Certain loans, including home equity loans and home equity lines of credit (HELOCs) use home equity as collateral.
What’s the difference between a home equity loan and HELOC?
We’ve mentioned two common home equity lending products—loans and lines of credit. These products have a similar premise (you can secure your financing with your home’s equity), but differences in how they supply you with funding and how you repay them mean that it’s important to choose the product that best fits your needs.
Home equity loans, sometimes called “second mortgages,” provide a lump sum payment of up to 80% of your home’s equity (65% if you still have your original mortgage or another home loan). They offer a fixed interest rate, fixed repayment period (loan term), and set monthly payment amounts. If you have a big project that will be completed over a shorter time frame (under a few months), they can provide the funding you need, with a stable repayment structure tailored for your budget.
HELOCs, on the other hand, work more like a credit card. Instead of being given a lump sum, you’ll be approved for a borrowing limit (also 65%/80%, like a home equity loan). HELOCs have two distinct phases, the draw phase and repayment phase. During the draw phase (5 years) you can draw against your credit line, making interest-only payments on the funds you’ve used. Your payment amount will vary based on the current interest rate and the amount you’ve borrowed. If you have a long renovation project that requires multiple payments, or many smaller renovations, the ability to use a HELOC for multiple payments over the course of the draw period can be especially useful.
Strategic home improvements can increase the overall value of your home, generating more home equity, and making it easier to sell in the future. However, it’s important to be aware of potential risks, too. Home equity lending is still debt—but debt that’s secured by your home. Because you are using your place of residence as collateral, it’s essential that the loan is affordable for you and that the risk of defaulting on the loan is low.
Budgeting and Planning for Home Renovation
Ready to take on your renovation project? Here are a few tips to help you financially prepare for your home improvements.
Set a realistic budget
Analyze your budget and estimate your home equity, to set a realistic budget that aligns with your financial situation and the available equity in your own, to guide you in your renovation plans.
Estimate renovation costs before seeking financing
Obtain more than one estimate for the job and conduct your own research for potential costs including materials, labor, and permits. This will allow you to apply for a loan specific to your needs, reducing out-of-pocket costs. Allow at least a 10% overage for unexpected expenses.
Speak to your lender or financial advisor
Consider the long-term financial impact of taking out a loan, including the impact on your monthly expenses, overall debt load, and lifestyle.
Avoid over-improvement
Consider the maximum value of your home, the property values of your neighborhood, and the added value of potential renovations before overextending yourself on renovations that may not make financial sense.
Leverage Your Home Equity with Citizen State Bank
Unlock your home’s equity to help you secure affordable financing for your renovation project. At Citizen State Bank, we can help you compare your financing options, navigate the application process, and assist you throughout the life of your loan.
Want to know more about our Home Equity Loan options? Make an appointment at your local branch in Naturita, Ouray, Ridgway, Silverton, or Telluride to get started!