10 tips to increase house value

Reasons to improve home value

Increasing your home’s value takes work and money. While embarking on a home improvement journey is not easy, those renovations definitely pay off over time (as equity!). If you need motivation, consider these simple facts about the ROI of upgrades and updates:

• You can sell your home for a higher price. If your home really is worth more based on the appraisal, you can sell it for a higher purchase price. Selling the home is the way you would realize the profit from your investment in the property.
• You can increase your home equity faster. Equity in your home is a function of not only your loan payments, but also the value of the home itself. The bigger the difference between your existing mortgage balance and your home value, the more you can use your equity for home improvements, debt consolidation or another financial need.
• You can potentially cancel private mortgage insurance on a conventional loan. If you made a down payment of less than 20% on a conventional loan, you must make PMI payments until you reach 20% equity in the home. If you make substantial home improvements, you can request a new appraisal of your home and possibly remove the PMI payments. The exact equity requirements needed on the reappraisal may depend on the investor in your mortgage, your number of units and how you occupy the home.

How to add value to your home

How do you add value to your home? What improvements offer the most ROI? We’ll start with a couple of basic things you can do to make sure your home looks as good as it can before we focus on the improvements that allow you to gain the highest possible level of return.

1. Declutter the interior

Get rid of what you don’t need. Downsizing a home doesn’t necessarily mean that you have to live in a smaller house; sometimes it’s about decluttering to make your existing space feel bigger. Open concept layouts remain a popular trend among home buyers.

When homebuyers are walking through your home, ensure they can navigate easily and visualize themselves in your space. Minimize your footprint and remove furniture you don’t use. Digitize pictures and remove framed photos from the home. Remember that potential buyers must visualize the home as their home; those pictures are your footprint, and they inhibit the visualization process for your buyers.

2. Clean the outside

First impressions are everything, and the exterior of the home is the most important first impression (this is also known as “curb appeal”). Rake the leaves; clean up the front lawn. Remove any toys or items. Rent a pressure washer and clear away years of dirt and grime that have built up on your siding. Give your windows a scrub, inside and out.

3. Consider a new paint job

Consider choosing neutral paint colors to appeal to all home buyers. If you painted your house as an homage to Jackson Pollock, you may choose to tone it down for the open house. Additionally, a fresh coat of paint in general can give a house new life.

From a practical perspective, you may need a new coat of paint if you have cracked or peeling areas in a home built before January 1, 1978. This period notably was problematic for a use of lead paint. Not repainting or otherwise mitigating the issue may cause you to fail an appraisal for a potential health hazard. Mitigate the lead paint.

4. Increase the home’s energy-efficiency

A survey conducted at the end of 2023 by Rocket Mortgage^® showed a strong preference for various energy-efficiency features in their homes among home buyers looking to buy in the next 5 years. These features include new windows, energy-efficient LEDs and insulation that help future homeowners save money on heating and cooling bills.

Among those polled, 35.7% stated they would like to see energy-efficient windows, while 35.6% prioritized an energy-efficient HVAC system. Solar panels were also sought after by 25.3% of respondents. Studies show a premium of up to 8% on the sale price compared to homes that aren’t Energy Star-certified.

5. Add some square footage

Increasing the square footage of a home offers a substantial ROI by increasing the usable space in your home. Additional bedrooms and bathrooms offer the most significant financial benefit, but you could also expand the kitchen and family room spaces if you’re looking at potential home additions.

In order for additions to be calculated as part of the home’s usable square footage, the rooms must include flooring, covered walls and ceiling and the option to live in it year-round. Heating and cooling must be considered when planning additions.

6. Install smart technology

Smart home technology is all the rage. Our previously mentioned home buyer preference study revealed that 24.6% of buyers would prefer a smart thermostat, 17.5% of them would enjoy smart lighting and 15.5% of respondents wouldn’t mind a smart entertainment system.

In addition to the convenience factor of being able to control lights, thermostats and other appliances from your phone or with your voice, some of these devices can be tied together and use machine learning that adjusts to your habits. These smart adjustments could lower your energy bills.

7. Remodel the kitchen and bathroom

The kitchen and bathroom are two of the most functional spaces in any house. Consider upgrading appliances or bathtubs, or create more luxurious shower spaces. However, do not feel pressured to make everything a major expense. Adding cabinets, repainting a kitchen, refinishing countertops, or replacing backsplash tiles can make a big difference without breaking the bank. When it comes to the bathroom, repainting and retiling can change the feel of a room, while replacing the mirror and fixtures or updating the bath or shower stall can also increase home value.

8. Install a pool

If you live in a northern climate, having a pool at your home to access during the summer can certainly set you apart among your neighbors In warmer areas where the mid-summer heat can be oppressive, a pool may be a must-have for some. The price to install a pool can vary, depending on the pool surface material as well as whether it’s in-ground or above the ground.

In addition to the installation costs, there is long-term maintenance associated with treating the water periodically and covering or uncovering the pool. For insurance purposes, a fence also may be a safety requirement.

9. Add a deck or patio

It’s easy focus renovation ideas on interior living spaces, but the exterior can be just as valuable for entertaining when the weather permits. A deck or patio provides extra room to hang out, play games and entertain guests. While a grill is common, you can also upgrade to a full outdoor kitchen space.

10. Construct a garage or shed

While it won’t add to the home’s livable square footage, garages or sheds can be considered a bonus feature by homebuyers. Whether the space is used to keep your vehicles out of the elements or as a workshop or fortress of solitude, an updated garage or shed can push up the value of your home.

Paying for renovations that increase home value

While the cost of fixtures and appliances, countertops and other flooring are the first things everyone thinks about, you also must factor in the cost for someone to do the work. Permits may also need to be pulled depending on the type of renovation. Here are some ways to finance your projects.

Personal loan

The strong benefit of personal loans is that the funding can be as quick as the same day because it’s based on your own personal credit history. You don’t have to wait for collateral to be appraised. Our friends at Rocket Loans^SM offer personal loans up to $45,000 with 3- or 5-year terms.

Cash-out refinance

A cash-out refinance involves accessing your home equity by taking a bigger balance on a new primary mortgage. You’ll need a fair amount of equity to do this because most major mortgage types require that you leave at least 20% equity in the home after the transaction.

If you qualify for a VA loan, you may be able to cash out up to the full value of your home.

Home equity loan 

Home equity loans offer another way to access your home equity if you don’t want to give up a lower rate on your primary mortgage. This is a second mortgages that has a slightly higher rate than you would receive if you were to refinance a primary mortgage.

Beyond rate considerations, the other reason to consider a home equity loan over a cash-out refinance would be to access more of your equity. Rocket Mortgage allows qualified clients to access up to 90% of their equity between the primary and secondary mortgages.¹

A home equity loan can have a fixed or adjustable rate, but you get the money in a lump-sum payment as you would with a cash-out refinance.

The bottom line: Find the best ways to increase home value

Whether you’re looking to make money in a sale, access more of your equity faster, or eliminate PMI, there are plenty of reasons to want to increase your home value.

There are a variety of ways to finance your home improvements. If you decide a cash-out refi or Home Equity Loan are right for you, get started with Rocket Mortgage.

¹ Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 2/5/2024 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00. Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Schwab products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend.