Watch CBS News

Projects you should use home equity to pay for

A home equity loan could be a smart way to finance a kitchen renovation. Getty Images

While low interest rates drove many to buy homes during the pandemic, the frenzy came to an end at the start of 2022. Now, we're seeing more homeowners staying put as the average mortgage rates fluctuate between 6% and 7%. However, the increased demand drove home prices through the roof, leaving many homeowners with more equity.

If you're wondering how to tap into that equity to make the most of your current home, a home equity loan or HELOC can be helpful. These loan types typically offer low interest rates and sizeable lump sum loans. Plus, if you're investing in home improvements, you may be able to write off the interest

But which home upgrades are best for boosting your home's value? Below, we list eight projects you should consider using home equity to pay for. Start by exploring your home equity loan options here now to see what you're eligible to borrow.

8 projects to use home equity to pay for 

The following eight home improvement projects tend to offer the biggest boosts to home values.  

1. Putting on a new roof

Is your roof nearing the end of its lifespan or showing signs of failure? If so, replacing it can be a big value booster. 

According to the 2022 Remodeling Impact Report by the National Association of Realtors (NAR), roof replacements offer 100% cost recovery. They can also help to entice potential buyers as they won't have to worry about roofing for decades. 

"One of the best home improvements for boosting home value is ensuring that the shell of a house is waterproof and energy efficient. That translates into installing a new roof, double-pane glass windows, and insulation inside walls," says Monika Zasada, a home construction and renovation expert at DE-MAZING.

2. Updating the HVAC system

HVAC units have a typical lifespan of 15 to 20 years, but many units that are just 10 years old lack the energy-efficient technology available today. According to the NAR report, updating an HVAC system offers a 103.5% cost recovery. 

3. Renovating kitchens

While renovating a kitchen doesn't offer the highest cost recovery rate (67% according to NAR) it can be the selling point that tips buyers in the direction of your home. 

"Renovating the kitchen and bathrooms can be expensive but it adds a lot of value to the home if done correctly," says Pratik Pathapati, owner of Rework Cash Offers, a real estate investment company. He adds, "Homes with renovated kitchens and bathrooms tend to sell quickly with multiple offers."

Explore your home equity loan options to learn more.

4. Renovating bathrooms

As Pathapati mentioned above, both kitchens and bathrooms tend to be very important to homebuyers. The NAR report says that bathroom renovations offer a cost recovery of 71%, but they can greatly enhance your experience in the home and win over the hearts of buyers. 

5. Replacing garage doors 

You may not think much of replacing your garage doors, but it's a home improvement project with one of the highest cost recovery rates.

Remodeling's 2023 Cost vs. Value report found that homeowners who replaced their garage doors recouped 102.3% of the costs, on average. NAR also reported a 100% cost recovery rate. 

"First impressions matter, and improving the curb appeal of a home can make a significant difference in its value. Focus on landscaping, exterior painting, replacing the front door, updating the garage door, and enhancing the overall appearance of the property," says Troy Robillard, realtor at Premiere Plus Realty, Co.

6. Adding/refinishing hardwood floors

Hardwood floors, whether new or refinished, offered the highest cost recovery percentages in both of the surveys we reviewed. Going the refinishing route offered the highest cost recovery rate of 147%, according to NAR, while new floors offered a 118% rate. 

"If the floors of your property have worn out, the first thing you should do is redo them. Hardwood floors, in this case, have a higher return in the market because they are durable and have demand in the market lately," explains Sal Dimiceli, Sr., owner of Lake Geneva Area Realty.

7. Upgrading insulation

As Zasada mentioned above, adding insulation to the walls of a home can be a worthwhile investment. New or additional insulation helps to keep your home cooler in the summer and warmer in the winter, reducing energy costs. NAR's survey backs up the recommendation, reporting that insulation upgrades offer 100% cost recovery. 

8. Manufactured stone veneer

Lastly, adding stone veneer to the exterior of your home can be a helpful way to boost your home's value. Remodeling's survey found it offers 102.3% cost recovery. 

"Stone veneer is a fantastic option," says John Hogan, an exterior remodeling contractor and the President of Blue Nail LLC. He explains, "It is a higher-ticket item, so we recommend it for covering foundations and using it on accent walls." 

The right home improvement project for you will depend on your priorities, budget and the unique needs of your home. However, these eight top the list when it comes to boosting your home's value. Plus, whether you use a HELOC or a home equity loan, as long as the funds are used to buy, build, or substantially improve your home — the interest can likely be deducted. 

Learn more about your home equity options - and how to pay for one (or more) of these projects - here now.

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.