There are many ways to create value in your home for a home refinance. Homeowners often do not understand which upgrades and/or renovations will actually help to build value when it comes to selling a home. An appraiser can only add value to a home for very specific things. Now let’s take a look at some of the things that a homeowner can do to add value to a home.

Does Home Improvement Build Value?

One of the best ways to add value to a home is to add a bedroom to the home. This essentially puts the home into a whole new class for the purposes of an appraisal. The home will now be compared to homes with 4 bedrooms instead of homes with 3 bedrooms for example. The homes with 4 bedrooms are essentially in an entirely different class when it comes to an appraisal. This can drastically increase the value of your home. The addition of a bathroom can also add a fair amount of value to a home.

Simple additions and upgrades can add value to a home, but generally will only add that value if some of the items that are being upgraded are in a state of disrepair. Upgrading a kitchen for example does not necessarily add value to a home for the purposes of an appraisal. The cost of granite countertops and highly customized upgrades do not translate to dollars when an appraisal is done. The amount that it costs for the upgrades will almost never add value above the cost of the upgrades.

This raises the question, what is the situation in your home? If you plan to live in your home for the rest of your life, then appraisal value really does not mean much for the purposes of upgrading your home. Simply decide if the money that you’re spending on upgrades will improve your quality of living. You do not need to worry about getting dollar value out of your upgrades. However, if you may be selling your house in the next 5 years or so and getting a new home loan, you have to be cost and value conscious. It is easy to spend $50,000 or $100,000 upgrading a kitchen. You will never recover this cost when you sell your home. If you spend that same money adding a bedroom and a bathroom you can add value in your home that will exceed the cost of the upgrades. It may even be a good idea to speak with an appraiser in your area and find out how much the value of your home will increase if you do add a bedroom or a bathroom. This can give you a good idea of what you should spend on the upgrades.

You also have to consider upgrades if you are selling your home. This gets a bit tricky. If bad landscaping or disrepairs are preventing you from getting offers on your home then it may be time to upgrade some of those things. You will most likely not recover the cost of these upgrades or repairs, but it may be the difference between selling your home or not. Your realtor should be able to help you make those decisions.

Refinancing Repairs

Home repairs are often needed before a bank will complete a home refinance for a homeowner. There are many different repairs that a bank may require. It will generally be determined by the home appraisal and what the appraiser comments on. If the appraiser makes comments on the shingles of the roof it is almost certain that some repairs will be required prior to the closing of the refinance mortgage.

In some cases the lender or mortgage company will ask for a cost to cure. This generally means that a specialist can determine how much it will cost to fix the problem, and that money will be put aside in escrow to cover the repairs. They may require a homeowner to fix things such as paint chips (possible lead paint), straps on a water heater and other simple repairs. This is just another way that the mortgage companies try to limit their risk when lending a homeowner money for a refinance mortgage.

The best thing to do is take care of any minor repairs before an appraisal is done on your home. This will reduce the time it takes to get your refinance mortgage funded and for you to start saving money. Appraisers will almost always comment on minor repairs that may be needed on your home. If they are not taken care of prior to the appraisal, you may have to pay for the appraiser to come back out and verify that the repairs have been made, and you will generally pay a fee for that service.

Keep repairs in mind the next time you are considering a refinance mortgage. It is always much easier to take care of them before the appraisal if possible. If you are unsure then talk to your mortgage professional about possible repairs before the appraisal is ordered. They will be able to explain the options to you.