Renovate my home Archives

April 11, 2023April 11, 2023

How the Inflation Reduction Act is Helping Homeowners Go Solar

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law. This act includes both new and revised tax incentives, like a solar tax credit, for clean energy projects, which have been growing significantly in popularity in recent years.

Here are the most important things to know about the act — and how you might be able to leverage it to lower your tax bill.

The Basics of Solar Tax and Clean Energy Incentives

A tax credit is a dollar-for-dollar reduction in your federal income taxes. In order to be eligible for the solar tax credit, you have to meet some basic criteria:

Your system must be installed and deemed operational by a city inspector in any tax year from 2022–2032.
Your project must fall under the umbrella of solar, geothermal, or fuel cell energy.

The solar credit amount under Section 25D, previously known as the Residential Clean Energy Credit, is dependent on the year in which the system installation was completed. It has increased from 26% to 30% for installations completed after December 31, 2021, and this credit will continue until December 31, 2032. In 2033, the credit will drop back down to 26%, then to 22% in 2034, and is set to be eliminated beginning in 2035.

If you’ve purchased and moved into a new home with a solar system and own the system outright, you’re eligible for the inflation tax credit the year you moved into the house. However, if you’re leasing the system or purchasing it through a power purchase system (PPA), the company that owns the system is eligible for the ITC instead.

To claim the credit, you’ll need to file IRS Form 5695 along with your tax return. On Part I, you’ll calculate the credit, and input the result on your 1040.

Why Homeowners Are Going Solar Now More Than Ever

In the second quarter of 2022, residential solar set its fifth consecutive quarterly growth record. Why are more homeowners than ever investing in solar? Industry experts point to a few reasons.

“There are two primary concerns driving growth: increasing electricity cost and decreasing grid reliability,” explains Matt Bramson, Elevation Executive Vice President of Marketing and Sales.

Bramson went on to explain that unless multiple batteries and associated load-handling equipment is installed, a battery cannot backup an entire home or even an HVAC system for long in a power outage. Additionally, the rate that utilities pay homeowners to buy back excess solar power is often so low that homeowners are finding it makes more financial sense to store that power in a battery during the day and consume it at night versus selling it back to the utility.

The rise in Electric Vehicles (EV) also plays a major factor in the purchase of batteries to allow for vehicles to charge overnight.

There’s one more often-overlooked factor driving solar purchases for homeowners: eliminating wasted energy.

“We like to remind homeowners that the cheapest and cleanest energy of all is that which you never consume,” said Bramson. “Most homes waste 10-20% of the energy they consume as a result of inadequate insulation, leaky HVAC ducts, and drafty doors and windows. Another 8-12% is wasted through suboptimal resident and appliance behavior — leaving lights and fans on, running wasteful appliances like small space heaters, and maintaining older appliances that lack energy efficiency. Solar providers like Elevation offer services that help eliminate home and resident energy inefficiency.”

Frequently Asked Questions About the Inflation Reduction Act

Do I qualify for the Inflation Reduction Act?

There are a couple of requirements you must meet in order to qualify for the Inflation Reduction Act. First, you must own the solar or battery system by purchasing it using cash, a solar loan, or a home equity investment, as you cannot use a lease or PPA financing to claim the tax credit. You’re also required to have an income tax liability, as this incentive was introduced to reduce it.

How long does a solar panel system take to install?

Most systems can be installed in a day or two, but you should factor in some extra time for the entire process, as you first need to be approved for financing and utilities, get the proper permits, etc.

How does the solar tax credit work?

In addition to meeting the stated criteria to qualify for the credit, you’ll need to file IRS Form 5695 along with your tax return to claim it. You’ll calculate the credit on Part 1 of the form, and input the result on your 1040.

In terms of financing, there are a handful of different ways to fund solar purchases — including designated solar loans that are widely available. However, they vary quite a bit in terms of fees, APRs, and timelines, so you’ll want to explore your different options. Home equity loans are also a popular choice, but since you’re taking out another loan on top of your mortgage, you’ll want to make sure you can handle additional monthly payments.

You can also access your home equity with a home equity line of credit (HELOC), which gives you flexibility in terms of amount and frequency of access. However, due to variable interest rates, monthly payments may fluctuate and be unpredictable, and your lender can freeze your HELOC at any time if your credit score drops too drastically.

Finally, a home equity investment (HEI) can give you access to your equity in cash relatively quickly in exchange for a share of your home’s future value. What separates a home equity investment from a loan or line of credit is that it isn’t a loan, and there’s no interest and no monthly payment. You can use the money for virtually anything you’d like. At the end of the effective period (or anytime before then), you buy out the investment with savings, a refinance, or the sale of your home.

With recent record highs in home equity and the revised tax credit, it might be the perfect time to make solar investments in your home.

Do you know how much equity is in your home today? Our free Home Equity Dashboard can help!

YOU SHOULD KNOW…
We do our best to make sure that the information in this post is as accurate as possible as of the date it is published, but things change quickly sometimes. Hometap does not endorse or monitor any linked websites. Individual situations differ, so consult your own finance, tax or legal professional to determine what makes sense for you.

October 27, 2022October 27, 2022

9 Home Renovations and Repairs to Do Now Before Retiring

With the extra free time you may find yourself with in retirement, you may see it as a good opportunity to tackle some long-desired home improvements — especially if you’re eventually planning to put your home on the market and relocate. However, there are some repairs and renovations that can be more beneficial to complete before you retire for a couple of different reasons. First, you’ll want your home to fit your lifestyle as you age. Second, it can pay off to make the renovations that can help your home sell before you’re on a fixed income.

Here are some of the most valuable changes you can make to your home before you retire.

Move Bedrooms to the Main Floor

While transitioning to one-floor living isn’t always easy, it can pay off in the long run to do it sooner than later if you want to remain in your home after retirement. If you already live on one level, turning one of the bedrooms into a primary bedroom can help sell your home and potentially add an average of $85,672 to its value. This may include adding an ensuite bathroom, walk-in closet, or dressing room.

Add a Full Bathroom to the Main Floor

Similar to bedrooms, whether you’re planning to stay in your home or planning to sell, having a full bathroom on the main floor of the house tends to be an asset. Not only can it be helpful as you age if you’re remaining in the house, but a guest bathroom can boost the resale value considerably. If you already have a bathroom on the main floor, it may be worth considering making your tub or shower more accessible; this can be as simple as adding a railing or seat.

Replace Your Lawn Areas with Hardscape

Less grass means less lawn maintenance. Save time, money, and effort by taking a look at your lawn and (thoughtfully) eliminating portions that you can fill in with pavement, stone, wood, or concrete. Oftentimes, these changes can boost curb appeal in addition to removing the need for mowing and grass upkeep.

Repair (or Fully Remodel) Your Kitchen

It’s no secret that kitchens sell homes — so if you don’t intend to stay in your home, your kitchen is the first room you should tackle, even if you’re only making relatively minor fixes like installing a new oven. Of course, you’ll likely boost the resale value of your home considerably if you do need to undertake a top-to-bottom refresh: even a mid-range minor kitchen remodel, which averages $26,214, can add an average of $18,927 to your home’s value.

Enhance Curb Appeal

The first impression of your home can be a lasting one, so a little exterior work can go a long way — especially if you’re planning to put your home on the market. Take a look at the siding and see if it could use a refresh; while the typical cost of siding replacement is just under $20,000, it can boost your home’s resale value by more than $13,000.

Make Garage Repairs

Another fairly easy and inexpensive step that both enhances safety and boosts curb appeal is replacing your garage doors, especially if they’re outdated or especially old. You’ll get almost as much back as you put into the replacement, as the average cost of garage door replacement is $3,907 and it can increase your resale value by $3,663.

Replace Your Roof

Roof repairs and replacements can be costly — $10,850 on average for a new metal roof — but not only will many potential buyers typically be curious to know the age of the roof before they purchase a home, ensuring that the top of your house is in tip-top shape can ease your mind and give you less to worry about if you’re staying put.

Check on Essential Systems and Appliances

Along with checking on the roof, doing a full inspection of oil burners, heating systems, and any other key parts of your home’s energy components is smart not only for health and safety reasons, but can save time if you sell your house down the road since potential buyers will be alerted any issues during an inspection.

Fix Any Hazardous Floor Issues

Minimizing the safety risks in your home is always a good idea, but especially so as you age. Taking care of cracks and loose boards in your floor, ensuring that your stairs are secured and railings are properly attached to them, and securing or removing loose carpeting are all relatively quick and cost-effective repairs.

If you’re looking for ways to fund your home repairs and renovations without taking out a loan or otherwise creating debt, a home equity investment could help. Take the fit quiz to learn if a Hometap Investment may be able to help you fund the repairs and renovations you need to live more comfortably in retirement.

September 8, 2022January 13, 2023

The Pros, Cons, and Alternatives to HERO Loans

The average American homeowner spends about $2,000 per year on energy. Small efficiency upgrades like sealing windows and doors can put a dent in those costs, and larger renovations like solar installations can offer greater savings. But like so many things, you’ve got to spend money upfront to save money in the long term. That’s where solutions like the HERO loan can come in handy.

You may have heard the term before, but what is a HERO loan, exactly? Simply put, a Home Energy Renovation Opportunity (HERO) loan is a form of financing that helps eligible homeowners cover energy-efficient improvements like window and door installation, solar panels, roofing, and landscaping. It originated from the Property Assessed Clean Energy (PACE) program, which finances these kinds of upgrades for residential, commercial, and industrial properties.

The HERO home improvement program, sometimes referred to as the HERO solar program for solar panel financing, is specifically geared toward residential buildings and lets qualified homeowners borrow up to 15% of their home’s value. It’s important to note that the HERO loan program also differs from the VA home loan program known as “Hero Loans,” which are designed to provide home financing assistance to veterans and their families.

Advantages and Disadvantages of HERO Financing

Like any home financing option, there are pros and cons to using HERO loans. On the plus side, if a borrower is eligible for one of these loans, they receive 100% of the cost of qualified improvements (again, not to exceed 15% of the home’s value). The loans typically have terms of 5–25 years, and homeowners can get started through contacting their local government’s PACE program sponsors. Approval criteria tends not to be as restrictive as traditional financing choices, since it is based on the equity in your home rather than your credit score. The loan may also be able to be transferred if the homeowner sells their home before paying off the loan, provided that the buyer and their lender are amenable to it.

However, HERO loan payments are added onto your property taxes, and since they’re classified as a tax lien, they take precedence over any other loans on the home in case the homeowner defaults. For this reason, lenders can be averse to backing HERO loans. In addition, the payments frequently appear on the second property tax bill instead of the first, which can put many homeowners in a particularly precarious financial position if they’re left scrambling to find the money to cover the extra expenses. And while it depends on the lender, this issue can also come into play when the homeowner is trying to resell the home, as the lenders of prospective buyers often don’t want to play second fiddle to the HERO loan.

For example, California homeowner Elizabeth B., who paid off her HERO loan with a Hometap Investment, ran into issues trying to refinance: “It is harder to refinance because of the lien they have on your home,” she said.

HERO Program Qualifications

The 2017 tax reform bill also put a $10,000 cap on property taxes, so if your bill is particularly high, you may not be able to write off your loan payments. In terms of cost, HERO loans come with a one-time fee of 6.95%, and interest rates can be quite high, up to 9%. Finally, it’s important to note that HERO loans are currently only available to homeowners in California, Florida, and Missouri, so eligibility criteria is quite narrow.

Frequently Asked Questions About HERO Loans

Is HERO financing a good deal?

While any home financing option depends on your own situation and personal goals, a HERO loan can be a good fit for homeowners in eligible states who are seeking funding specifically for energy-efficient home improvements. If approved, they can receive 100% of the cost of these projects.

How do I get out of a HERO loan?

Before deciding on a HERO loan, it’s important to make sure you consider your options, as the inability to pay it off can put you in a tough spot. However, if you sell your home before paying back the loan, and your lender and the buyer are amenable to it, you may be able to transfer the loan.

Learn how Elizabeth B. used a home equity investment to pay off her HERO loan >>

What credit score is needed for a HERO loan?

Since HERO loans are based on your home equity rather than your credit score, this requirement is typically quite lenient compared to other financing solutions.

What are the terms of a HERO loan?

While the terms can vary by the specific loan, HERO loans usually allow eligible homeowners to borrow up to 15% of their home’s value and have a term of 5–25 years.

Is a HERO loan a lien?

Yes, a hero loan is considered a tax lien. As a result, it takes precedence over any other loans on the home if you default.

How are HERO loans paid back?

HERO loans are paid back along with a homeowner’s property taxes, with the loan balance usually appearing on the second tax bill. It’s also important to note that in addition to the loan balance, there is a one-time fee of 6.95% attached to HERO loan, in addition to ongoing interest.

HERO Loan Alternatives

If you are planning to make energy-efficient improvements to your home but don’t live in a participating state, there are a few other options. Many states have programs sponsored by gas and electric companies that provide free energy-saving services, such as Mass Save, Efficiency Maine, and NH Saves, to name a few.

You can also tap into your home equity with a home equity loan, which provides a fixed interest rate and a lump sum payment. However, it can be challenging to meet the often restrictive approval requirements, and you’ll be responsible for the loan payments on top of your regular mortgage installments.

There is also a home equity line of credit (HELOC) that gives you flexibility in terms of how much and how often you can borrow money, but it too has downsides — a variable interest rate means that your monthly payments can fluctuate unexpectedly, and your lender can freeze your HELOC at any time if your credit score dips too low.

A cash-out refinance can also get you some extra funds and help you secure a lower interest rate on your mortgage. But since you’re taking out another loan on your home, you’ll have to pay the fees you dealt with the first time around when taking out your mortgage.

Another way you may be able to finance eco-friendly or energy-efficient upgrades is a home equity investment. You can receive cash in exchange for a share of your home’s future value to use for energy-efficient upgrades and replacements, all without monthly payments or interest.

Take our five-minute quiz to see if a Hometap Investment might be a fit for you as an alternative to a HERO loan.

YOU SHOULD KNOW…

We do our best to make sure that the information in this post is as accurate as possible as of the date it is published, but things change quickly sometimes. Hometap does not endorse or monitor any linked websites. Individual situations differ, so consult your own finance, tax or legal professional to determine what makes sense for you.

June 1, 2021June 23, 2022

Should You Sell Your Home or Tap Into Your Home Equity?

Today’s real estate market has a lot of homeowners debating whether they should cash in on their home’s appreciation by selling their home or accessing their home equity. There are several factors to consider that can help you make the decision that’s right for you. Below, explore the advantages and disadvantages of each option, as well as the most common ways to access your equity so you can answer the question Should I sell my home? with confidence.

Selling: Pros and Cons

While the idea of downsizing to a smaller home or conversely, finding a house with more space to spread out may seem appealing in theory, the current market can make it a whole lot tougher in reality.

At the moment, the real estate market is red-hot, with a median sale price of $370,528 — an increase of more than 22% year-over-year from April 2020. More than 600,000 homes sold in the U.S. in April, a jump of 38.2% from the previous year. Mortgage rates have also dropped 0.2 points, making it more tempting than ever for prospective (and stir-crazy) buyers to lock in an offer on a new house.

Given the competitive nature of real estate, not only are houses selling for hundreds of thousands of dollars over asking price. But more and more, sellers are adding contingencies that allow them to stay in their home until they find a new property.

Often, short-term financing solutions like bridge loans can allow buyers to forego the contingencies and move more quickly, which can be a huge plus in a hot market. But it comes with risks, too. Some contingencies include forgoing home inspections, which may end in buyers’ remorse for those urgent to move into a new home.

There’s also the costs of moving to consider. If you plan on hiring movers, the average price tag is more than $1,000, depending on how much you’re taking with you. And of course, that’s not taking into account the hassle and emotional toil of the whole process.

In short, those looking to downsize or move to a location with a less competitive market have a great opportunity to cash in on a hot market, but it’s important to have a strong handle on your numbers and your moving plan.

Tapping into Your Equity: Pros and Cons

Moving isn’t the only way to make the most of your home’s growing value. You might be able to transform your current home into your dream home by tapping into your hard-earned equity to make the renovations you’ve been putting off — or build a long-desired addition.

If you decide that you want a seasonal getaway, you can also use your equity to put a down payment on a vacation home. There are a handful of different ways to get equity out of your home. Let’s explore the most common ones.

Home equity loan

One of the most common ways homeowners tap into their equity is through a home equity loan, as its fixed rate and lump sum payment often makes sense for funding home improvement projects. However, the qualification and approval process can present hurdles, as most lenders require a firm minimum credit score and stringent criteria.

HELOC

You can also open a home equity line of credit (HELOC) to access your home equity. This option offers flexibility in terms of the amount of money and how often you can borrow, but also comes with a level of unpredictability due to rate variability. It can also be risky because your lender can freeze your HELOC if your credit score or home value decreases.

Cash-out refinance

A cash-out refinance is another popular option for tapping into your equity. If you go this route, you have the chance not only to cover the cost of your renovation, but also to secure a lower interest rate on your mortgage. However, since you’re essentially paying off your mortgage with your current one, your timeline will be extended and you’ll have to pay application, closing, origination, and possibly even appraisal fees.

Learn more about when a cash-out refinance makes financial sense >>

Home equity investment

With a home equity investment, you can get a portion of your equity in cash in exchange for a percentage of your home’s future value — usually within a few weeks. You don’t have to deal with any monthly payments or interest, and can use the funds for whatever you’d like. This solution allows you to stay in your home and bypass the challenges and extra costs associated with moving.

Ultimately, Should I sell my home or tap into my equity? is a question only you can answer based on your own financial and personal situation.

Take our five-minute quiz to see if a Hometap Investment might be a good fit for accessing your equity without having to sell your home.

YOU SHOULD KNOW…

May 25, 2021March 22, 2023

The Cost of Solar Panels and 5 Ways to Finance Them

If you’re looking for ways to make your home a whole lot more energy-efficient and save some cash at the same time, solar panels might be a good option for you. The average American family can save more than $1,400 a year in electrical costs by adopting solar energy, and the savings begin as soon as the panels are installed.

There are many benefits to solar panels beyond the potential savings. One of the biggest is that they’re a renewable energy source, meaning that you can never run out of it. Another plus is that solar panel maintenance is fairly easy, requiring cleaning just a couple of times per year. Most systems come with a 20–25 year warranty, and the only part that will typically need to be replaced every 10–12 years is the inverter, which converts electricity. Below, learn about the cost of solar panels and some of your options to pay for them.

Are Solar Panels Worth It for Me?

If you’re considering the switch to solar energy, the first step is to make sure you’ll be saving more than you spend. The easiest and best way to do this is to take a look at your electric bill. Energy rates can fluctuate significantly over time, but if you notice a long-term trend of high bills, you might benefit from solar panels.

Of course, you’ll also want to ballpark the cost of the installation and purchase of panels. Just like any home service, these can vary by company, so it may be worthwhile to request estimates from multiple vendors in your area. Unfortunately, you do need a professional to help you — this is one area where DIY won’t cut it, and it’s worth the money to have a quality system correctly installed onto your house.

Finally, it may seem like a given, but the more sunlight your home receives, the more money you’ll be able to save with solar panels; this is why they’re more common in western states like Arizona.

With the overall cost of solar panels falling more than 20% in the past five years, it may be a good time for you to take the plunge. This AI-powered calculator can help you determine your home’s “solar potential,” including recommended system size, savings amount, and more.

The average post-tax credit cost for 10 kilowatt (kW) solar panel installation in the United States in 2021 ranges from $17,760 to $23,828. Per watt, that breaks down to $2.40 to $3.22. The pricing is dependent on a couple of different factors, including system size and panel brand, and of course, state. Cost by state ranges from $2.34 per solar watt in Kentucky to $3.16 in Washington, DC. In general, the larger the system, the less expensive it is to operate.

Solar Tax Credits and Incentives

While solar panels can be expensive, you can enjoy some discounts that cut the price down a bit. The Residential Clean Energy Credit offers a 30% credit to homeowners as of 2023 (up from 26% in 2022). In combination with the drop in panel cost from that of previous years, you have the potential to maximize your savings by transitioning to solar now.

There are some other state-specific tax benefits you may be eligible for, including sales tax exemptions, income tax credits or deductions, and property tax rebates or exemptions. Sales tax exemptions are fairly self-explanatory, with the state exempting the cost of energy-efficient purchases. Income tax credits for energy-efficient home improvements are available in several states to homeowners who don’t exceed a single or joint income threshold, and property tax exemptions, offered in 32 states including New York and California, provide reductions for a percentage of the cost of a solar energy system.

Leasing vs. Owning Solar Panels

One of the biggest decisions you’ll need to make when it comes to solar panels is whether you want to lease them or purchase them outright. Here are a few questions to ask yourself:

Can I reap the financial benefits of solar energy in addition to the environmental ones?
Am I willing to handle necessary maintenance and repairs of my system?
Am I eligible for the tax credits that come along with solar?

If you answered “yes” to the above questions, owning your panels might be the best option — however, if you aren’t prepared to handle occasional maintenance, don’t want to wait until the following year to receive the kickback from tax credits, or are otherwise ineligible for these credits, it’s probably a better idea to lease.

Financing Solar Panels

There are a number of ways to handle the cost of solar panels. Let’s take a look at a handful of the most common ones.

1. Solar loan

As the name suggests, solar loans are specifically designed to assist with solar panels, and widely available. However, these loans vary widely by lender in terms of their APRs, fees, and funding timelines, so it’s important to do your homework if you decide to go this route.

2. Home equity loan

A home equity loan is one of the most common ways that homeowners finance their solar panel installation, as it provides cash in one lump sum and has a fixed interest rate. However, you still need to worry about making your mortgage payments on top of the loan, and depending on your lender, the application and approval process can be challenging.

3. HELOC

A home equity line of credit (HELOC) gives you flexibility when it comes to how much and how often you can access your funds, and has the potential to improve your credit score. On the other hand, the variable interest rate means monthly payments can fluctuate, and your lender can freeze your HELOC if your credit score or home value drops.

4. Government loan

There are also options for government assistance when it comes to financing solar energy updates. While there aren’t any federal government loans available on a wider scale — just the tax credits mentioned above — there are a variety of programs through various state and local branches that can help you with the move to solar energy if you live in a participating community. These include Green Retrofit Grants, the Tribal Energy Program, and High Energy Cost Grants.

5. Home equity investment

Finally, a home equity investment can help you cover part or all of the cost of solar panels for your home. You can access a portion of your home’s equity in a lump sum in exchange for a minority stake in the home’s future value. Since there aren’t any monthly payments or interest, you don’t need to worry about the hassle of extra costs, and you can get the money you need in as little as three weeks.

YOU SHOULD KNOW…

April 15, 2021March 22, 2023

9 Home Efficiency Upgrades Homeowners Should Know About

modern bedroom with energy-efficient windows

Being “green” is all the rage lately, but did you know that making home efficiency upgrades can help you save money in addition to helping save the planet? And contrary to popular belief, you don’t need to break the bank or build a completely new LEED-certified green home to take steps toward a more eco-friendly existence.

On average, the monthly electricity bill for a U.S. homeowner is $117, with heating and cooling accounting for 32% of the cost. With just a few tweaks, you can make a huge impact not only on your finances, but on the health of our planet, too.

Quick Efficiency Changes for a Green Home

Adopting some small green home routines can help you ease into a more efficient lifestyle with minimal effort. These include:

Keeping your thermostat a few degrees lower
Washing with cold water instead of hot
Unplugging chargers when you’re not using them
Turning off water when it isn’t necessary (while brushing your teeth, for example)

Implementing more sustainable practices is just one way to bring down home-related expenses without making huge changes — check out some other fast fixes you can make.

A Step Further

Ready to kick your home efficiency habits into high gear? There are more than a few places to start.

5. Start a Compost Pile

Estimated cost: Free, unless you choose to create or purchase a dedicated compost bin, which can range from $40-400

How long until I see ROI? Typically two months to one year — dependent on materials used, effort (whether you’re actively or passively composting) and other factors

If you have the space for it, a compost pile can be a great way to put food scraps and yard waste to use. There’s so much you’re able to compost, beyond just items like fruits, vegetables, and eggshells. In fact, your coffee grounds and filters, tea bags, old newspaper, and fireplace ashes are all fair game as well. The most important thing to remember is that a good compost strategy should include a combination of “browns, greens, and water” that makes for a healthy carbon/nitrogen ratio.

To begin composting, start your pile on bare earth, and add your materials layer by layer, making sure to switch between wet and dry as you go along. Once you’ve created your initial compost pile, cover it with plastic, wood, or carpet, and make sure to aerate it every two or three weeks by turning it with a shovel or pitchfork. (Some pricier, tumbler-style compost bins allow you to mix your compost within the container).

Currently, compostable materials make up approximately 30% of the waste in landfills. By keeping it on your property and out of the landfills, you’re helping to improve your soil to help your plants thrive, as well as reducing harmful greenhouse gases that are released into the atmosphere.

6. Install Low-flow Showerheads

Estimated cost range: $20–$150 per showerhead

How long until I see ROI? Immediately

According to the Environmental Protection Agency (EPA), showers make up 17% of the average family’s water use, which accounts for about 40 gallons per day. One easy way to waste less water is swapping out your existing showerhead for one that’s designed specifically with more economical water usage in mind. On average, just one low-flow showerhead, used by one person, can save about 2,000 gallons of water per year. What’s more, because the demand for hot water decreases with these showerheads, carbon dioxide emissions are also reduced.

7. Seal All Windows

Estimated cost range: $15–$17 per window

How long until I see ROI? Immediately

If your windows aren’t properly sealed, cold (and hot) air can easily seep in, making for more expensive heating and air conditioning bills. While you can install insulating shades to block heat and cold for a super quick solution, the most economical course of action is to affix a clear plastic sheet to each window that creates a tight seal around the frames. Caulking the perimeter of each “leaky” window, as well as the crack between the interior trim and the wall, is a slightly more involved. But it’s still relatively simple process that will pay for itself in no time.

8. Install Energy-Efficient Windows and Doors

Estimated cost range: $300–$1,000 per window and $700–$1,100 per door

How long until I see ROI? This depends on several factors, including the number of windows and doors, materials you choose, and the climate where your home is located. Those in colder climates can expect a 12% savings in their energy bill, and it’s worth checking with your local energy provider to see if they offer rebates, which could expedite your ROI.

Consider replacing all of your doors and windows for an even bigger impact (and higher return on investment). It may seem like a daunting task, but when you consider the personal and environmental benefits, it’s a no-brainer.

Hiring a reputable professional to take care of the installation of your energy-efficient windows and doors is your best bet, but there are some tips to keep in mind to make sure you’re getting the best bang for your buck. Choosing vinyl or composite door and window frames is a smart choice, as they have a longer life than wood and require less upkeep, and double-hung or casement windows both naturally lend themselves to better ventilation.

For window glass, look into “Low-E“ (low emissivity) glass, which has an oxide coating to reduce heat transfer. When shopping for energy-efficient doors, make sure to look for Energy Star® rated models, and consider adding weatherstripping for extra protection from the elements. It’s worth mentioning that quality windows and doors provide excellent resale value — yet another opportunity to recoup some of your cost.

9. Replace Incandescent Bulbs

Estimated cost range: About $5 per bulb for LED, $2 per bulb for CFL

How long until I see ROI? Immediately, but the savings really add up over time; some estimates suggest you could save more than $3,000 during the typical lifespan of LED bulbs if you replaced 20 of them.

Switching out all of your incandescent light bulbs for compact fluorescent lamps (CFLs) or Light-emitting diodes (LEDs) can be tedious. But if you’re interested in lowering your monthly energy bills, getting more mileage out of your lighting, and reducing carbon dioxide emissions, it’s worth it.

Not only are LED lights more energy-efficient, but they can last up to 80,000 hours. That’s approximately 8 to 10 times longer than halogen lamps. In addition, they’re one of the safest lighting choices, as they are free of mercury and other toxic gases and don’t emit any harmful UV rays.

How to Finance Green Home Upgrades

Traditional options

Home equity loans, home equity lines of credit (HELOCs), or cash-out refinances are all options for many homeowners looking to cover the costs of eco-friendly improvements, energy efficient appliances, and more. While they can make sense for the renovation needs of many homeowners, they all come with disadvantages that are worth considering before committing.

The approval process for a home equity loan, for example, can be difficult, and you’re stuck paying the loan back in addition to your existing mortgage. HELOCs, while flexible in terms of accessing funds, can lead to unpredictable monthly bills given their variable rates. And cash-out refinances not only extend your mortgage timeline, but come with the fees and charges that accompanied your first one. Application, closing, and origination fees, and possibly an appraisal, are among those costs.

Home Energy Renovation Opportunity (HERO) loans

HERO loans provide financing for energy-efficient home improvements in California, Florida, and Missouri, and are paid back through property taxes. Because they cover 100% of the costs for upgrades like energy efficient water heaters, solar panels, roofing, and window and door replacements, they can be extremely appealing to homeowners. However, it’s important to do your homework and be careful with these loans for a number of reasons.

If you plan to sell your home down the road, HERO loans can make it more difficult. Since they take first priority if you default, this presents a conflict with your mortgage lender, who typically requires that they are paid first. The interest rates are also extremely high — up to 8.99% for a 25-year term, plus an administrative fee. Finally, as mentioned above, you’ll be paying back the loan on top of your property taxes. The government’s 2017 tax reform bill caps property tax deductions at $10,000. This means you may not be able to write off your HERO loan payments if your taxes are particularly high, and can run into trouble.

Learn how California homeowner Elizabeth used a Hometap Investment to pay off the debts she incurred with a HERO loan.

Home equity investments

A home equity investment can help you use the equity you’ve built in your home to fund your renovations and energy-efficient upgrades. In exchange for a percentage of your home’s future value, you can access cash that you can use however you’d like. And with no monthly payments or interest, you don’t have to worry about taking on debt to save money on your expenses. A home equity investment can help you get the funds you need to make your home more energy efficient.

YOU SHOULD KNOW…

July 23, 2020June 23, 2022

Financing a Home Renovation: What Construction Loan Is Best?

Making home renovations has two obvious perks. First, you can make upgrades that fit your lifestyle and allow you to enjoy your home even more. Second, the upgrades you make now may help increase the value of your home, so that when it comes time to sell, you make a profit.

However, the way you fund your home renovation can have serious implications for your short- and long-term finances. For repairs that will cost more than you can afford to pay in a month, you may want to look at financing options beyond your credit card. That way, you can avoid paying the high interest rates that come with a credit card balance.

If you don’t have the savings stashed away to fund your renovations, you do have other options. You can build your cash flow for home renovations, use your home equity, or use a home renovation loan.

How Does a Construction Loan Work?

Construction loans — also known as home renovation loans or home remodel loans —are a common way to finance home improvement projects, as they often have lower interest rates than credit cards. With a home loan for construction, renovation costs are rolled into your mortgage, so you’re essentially making one payment each month that includes both the cost of your home and the repairs or upgrades you plan to make.

This can be beneficial if you’re purchasing a fixer-upper, but if you’re already in your home, the cons may outweigh the pros as you’ll be refinancing your home with a new mortgage. And, while renovation loans may be more appealing for homeowners without home equity, homeowners with home equity have additional options for accessing funds.

There are three main types of renovation loans that allow homeowners to make updates now rather than waiting to have enough cash saved.

FHA 203(k) Loan

Insured by the Federal Housing Administration, the 203(k) loan comes in two forms: standard and limited.

The standard 203(k) loan covers major structural repairs and other renovations that cost at least $5,000. There is no cap on repair costs, however, you have to hire a U.S. Department of Housing and Urban Development (HUD) consultant to oversee renovations and projects. The HUD lists the projects covered by a standard loan.

The limited 203(k) loan is capped at $35,000 for renovations, not including structural repairs.

Pros to 203(k) loans:

Can use a standard loan to tear down and rebuild on the foundation.
Potentially easier to secure funding; since they’re insured by the government, lenders may have less strict credit qualification requirements.
If your home isn’t inhabitable as you make renovations, you may be able to include up to six months of mortgage payments in your loan. You can continue to make monthly payments, but live elsewhere.

Cons to 203(k) loans:

No do-it-yourself work with strict requirements on what renovations are covered.
Must use an FHA-approved lender.
Cannot use this loan with the intention of flipping the house or on homes that are under a year old.
With the standard loan, funds that aren’t going to the seller (if buying the house) or to pay off an existing mortgage (if refinancing) are placed in an escrow account and released as rehabilitation is completed.
Improvements must be completed 60 days from the loan’s closing date for limited loans and within six months of closing for standard loans. You will need a detailed estimate of the cost of work to be done and timeline from your contractor before your loan is approved.

HomeStyle Loan

Offered by Fannie Mae, HomeStyle loans are one of the more flexible renovation loans in that there are fewer restrictions on what you can use the funding for. Homeowners can get 75% of “the sum of the purchase price of the property, plus renovation costs,” or 75% of the “as completed appraised value of the property” — whichever is less.

That means if you’re refinancing your home, an appraiser will estimate the value of your home post-renovations. If they determine the value of your property with renovations completed will be $300,000, then the financing amount can’t exceed $225,000.

Pros to HomeStyle Loans:

Can use funds for almost any renovation project, whether cosmetic or structural, including “luxury” updates like a swimming pool or landscaping.
Can use the loan on an investment property.
Can complete final work on a brand-new home, as long as the new home is 90% complete.
Like a 203(k) loan, you may be able to include up to six months of mortgage payments in your loan if you need to live elsewhere while renovations are completed.

Cons to HomeStyle Loans:

Like the 203(k) loan, your money sits in an escrow account and contractors get paid once they complete certain renovation tasks.
Must use a certified contractor who needs to include a detailed cost estimate of the work you want done — potentially before the loan is approved.

CHOICERenovation Loan

Guaranteed by Freddie Mac, the amount of money you can receive for renovations using a CHOICERenovation loan is similar to the HomeStyle loan in that you can make renovations that cost up to 75% of the as-completed appraised value.

Pros to CHOICERenovation Loans:

Can use the loan to repair your home if it’s been hit by a natural disaster or to fortify it against a future disaster.
If buying a home and taking out a loan like Freddie Mac’s Home Possible loan, you may be able to make DIY renovations in exchange for sweat equity (but you’ll need to go through an appraisal before and after improvements).

Cons to CHOICERenovation Loans:

All renovations must be completed within a year.

If none of the specialized loans above make sense for you due to use restrictions or approval criteria, yet another option for financing fixes is using a personal loan as a home improvement loan or home repair loan. They typically don’t require any collateral and provide funding quickly, but come with high interest rates and additional monthly payments, so it’s important to do your homework.

Read 5 home renovations to make before you sell >>

Other Home Improvement Financing Options

When you get a home renovation loan, you generally must use the funds toward making home improvements, often with strict requirements about what qualifies. The paperwork involved will be similar to when you first took out your mortgage.

That can slow down the process and, if your mortgage is locked in at a low interest rate or you only have a handful of years left to go on your mortgage, you may not want to mess with it (of course, if you can lower interest rates and/or the time left on your loan, you’ll want to do the math to decide if these options make the most sense).

Current homeowners should first look at how much equity they have built in their homes and the ways they can access that money. That way, you also won’t be saddled with closing costs and other fees associated with refinancing.

Compare your options: Get cash for your home equity

A home equity investment allows you to get a portion of the value of your home in cash now in exchange for a share of the future value of your home. Since it’s an investment, there are no monthly payments or interest. You settle the investment when you sell your house.

Once you have the cash, you can make whatever home improvements you’d like, including improvements on an investment property, vacation home, or multiple properties.

Some home equity investments, like that offered by Hometap, also offer renovation adjustments. That means you can request an adjustment to the agreed home value to account for any appreciation in the value of the property as a result of certain qualified renovations amounts costing $25,000 or more.

When you settle your investment, you provide Hometap with the evidence of the renovation, including receipts and photographs of the renovation work. If approved, following an appraisal, the amount of a renovation adjustment will be the difference (as determined by an appraiser) between the appraised value of the property post-renovation and the hypothetical value of the property without renovations. Accepted renovation adjustments are not guaranteed.

Read Matt’s story about how he used an equity investment to build a rental property for additional income.

Pros to home equity investments:

No time limitation on renovation projects; investment is settled within 10 years.
Homeowners can fund DIY projects, outsource to professionals, and have no limitations on who to hire or types of projects.
No interest and no monthly payments.
Cash is available to the homeowner in a lump sum in as little as three weeks.

Cons to home equity investments:

Investment is settled within 10 years, which means if the homeowner doesn’t plan to sell the home and use the proceeds to settle, they will use savings, refinance, or take out a loan.
Must have a minimum of 25% equity in the home to qualify.

Which Renovation Loan Is Best?

The best way to finance a home renovation will depend on the renovation you want to make, your current financial situation and future financial goals, among other factors.

Look into all of your options and consider the renovations you want to make. Some renovations have a higher return on investment than others, so you’ll want to prioritize projects that you may need, but also the ones that will help increase the value of your home.

See how homeowners have used Hometap to fund renovations »

Take our 5-minute quiz to see if a home equity investment is a good fit for funding your home renovations.

YOU SHOULD KNOW…

May 18, 2020June 23, 2022

3 Things You Should Do Before You List Your Home for Sale

Selling a home can often feel more stressful and time-consuming than buying one. Not only do you have to get your home in tip-top shape, but you also have to keep it that way while juggling showings, open houses, and everyday life. If you’ve already purchased your next home, the stress quickly multiplies as you potentially juggle multiple mortgages while you wait for your home to sell. Understanding the best time to put your house on the market and the most effective ways of preparing your house for sale will ease that stress (and hopefully speed up its time on the market).

To make the process easier, Zillow recommends giving yourself at least two months to get your home ready for its listing debut. Here are three steps to take during that time to ensure your home-selling experience is as low-stress—and lucrative—as possible.

1. Run the Numbers

Before calling a listing agent, you want to make sure you’re emotionally and financially ready to sell your home. Only you can answer whether you’re ready to move.

Finance personality Dave Ramsey recommends staying in your current home until you’ve built enough equity to pay off your remaining mortgage balance and put 20% down on the purchase of a new property.

You’ll also want to make sure you have enough cash in the bank to cover the costs of movers, storage, and making any necessary repairs or upgrades to both the new and existing homes.

When is the best time to sell a house?

If you have the flexibility, wait until May to sell your home. Homes sold in the first two weeks of May traditionally sell six days earlier than the average listing. They also net more than $1,500 more on average. Of course, the best time to sell your home can depend on other factors and can vary regionally, so it’s worth doing your research and asking real estate agents for their opinion. The best time to sell a home in Massachusetts, for example, may not be the same for the market in California.

2. Find Comparable Homes in Your Area

To calculate how much equity you have in your home, you can get a formal appraisal or you can look at what real estate agents call “comps.” Short for “comparable sales,” comps are homes that recently sold in your neighborhood and are similar in condition and size to your own.

These can help you gauge how much you can get for your property when it’s time to list. They can also help you judge how long it may take to sell your home. If all of the similar comps were on the market for months, you may be in for a long ride. Be sure to pay attention to how much they sold for and how much they were listed for.

Read How to Predict the Appraisal Value of Your Home for more details.

As you’re scrolling through nearby comps, consider the condition of each home. Do they all have updated bathrooms? A recently renovated kitchen? This will give you a sense of what renovations you can make on your home to attract the attention of potential buyers, sell your home faster and increase your profits.

3. Determine Which Renovations Are Your Best Investments

Now’s not the time to strip your home to the studs or build an addition. But with a few smart tweaks and weekend projects, you can increase your home’s appeal—and profit potential.

For more details on which home renovations are your best investment, read Selling Your Home? Get Top Dollar by Tackling These Renovations First

Focus on First Impressions

Sprucing up your home’s exterior is an easy way to make the best first impression with potential buyers.

“Curb appeal can be improved by some basic efforts such as power-washing the home’s exterior,” says Rhoda Wheeler, a Realtor at Hoffman Real Estate Group. She also recommended spending a weekend refreshing the mulch, trimming back overgrown plants, and placing a few eye-catching flowers near the entryway.

Adding a fresh coat of paint to the exterior walls that face the street, or at least touching them up, can also boost your home’s curb appeal.

Clean Up the Kitchen

Many real estate agents agree that the kitchen is one of the most important rooms in the home. But chances are yours doesn’t need a gut job to get the attention of potential buyers.

Small upgrades like freshly painted cabinets or new door hardware can make your kitchen, and your home, more appealing.

If you can swing it, some new appliances could also help your home sell faster. These may not offer you a full return on investment (you’ll typically only be able to recoup about 87% of the costs on a minor kitchen remodel). But if a new $600 range helps your home sell faster, then it may seem worth every penny.

Beautify the Bathroom

The bathroom is another space that can make or break a sale.

“In most cases, almost overwhelmingly, it is beneficial to get a bathroom remodel done before selling a home,” real estate agent Jacki Shafer told Homelight. “My attitude has always been to put your very best foot forward whenever possible. If your bathrooms are tired and need sprucing up, it’s always a good idea to do that.”

Even if you can’t pull off a major remodel, you can freshen up a dingy bathroom by re-grouting the tile, replacing the caulk, and buying new mirrors and fixtures. A fresh coat of light-colored paint can also make a bathroom more appealing.

How to Fund Your Renovations

Once you have your to-do list made, it’s time to estimate the expenses and compare them to your anticipated returns.

Read 5 Ways to Build Your Cash Flow for a Home Renovation

The best way to fund your home renovation really depends on you. You can dip into savings, take out a loan, put them on plastic, or you can avoid high-interest credit card fees by utilizing a home equity investment. You can receive a percentage of your home’s equity now in exchange for a share of the home value at the time you decide to sell. With no interest or monthly payments, Hometap may be a smart way to fund the upgrades that will hopefully lead to a bigger payout on signing day. And with no monthly payments, you can focus on making the repairs and moving into your next home.

Find Out if Hometap Can Help You Fund Your Home Upgrades Before You List

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

October 29, 2019January 5, 2023

4 Ways to Finance Your Home Addition or In-Law Suite

Are you looking for ways to finance a home addition? Across the country, the number of people living in multigenerational households is on the rise. According to the Pew Research Center, more than 20% of the population shares their homes with at least one other adult generation. That’s up from 12% in 1980.

Enter the in-law suite: They empower multiple adults to live under the same roof while still maintaining separate living spaces. Below, we’ll cover the different cost aspects to consider, the different types of additions, and how to finance a home addition.

Comparing the Costs of In-Law Suites, Nursing Homes and Assisted Living Communities

For some families, having a parent or grandparent move in makes smart financial sense. Especially if said parent or grandparent needs extra help with their day-to-day activities, has mobility issues, or health issues that need close looking after.

If you compare the cost of paying rent at a nursing home or assisted living community versus building an in-law suite, it may make more financial sense for your situation, even if you factor in the cost of a companion or visiting nurse to help with chores and caregiving.

Read 3 Ways Home Equity Can Fund Your Retirement

Added bonus: The in-law suite could be used for other purposes—an Airbnb rental, guest house, or office—when it’s not needed by a family member.

Is an In-Law Suite Right for Your Family?

The first question to ask yourself before starting your in-law suite journey might not be what you’d think: Is it legal?

Many neighborhoods, cities, and counties have rules regarding the size and types of additions you can build on your home or how you can remodel a space like a garage or basement. When it comes to building a separate structure, often referred to as an accessory dwelling unit, or ADU, the rules may be even tighter.

Start by calling your city’s zoning office to find your area’s rules and regulations. Then contact a builder or architect for a vision of what’s possible within those limitations. If substantial renovations are needed, you can consider expanding your liability coverage as it could help cover legal fees if someone injures themself on your property. As more people will be going in and out of your house, it could be helpful to look into how multigenerational housing will impact your home insurance policy moving forward.

Before you break ground, it’s also important to consider the emotional impact of having family members move into what was previously your personal space. Your parents or grandparents may also have concerns about moving in together. Establishing open lines of communication early in the process will help ensure the arrangement is a success.

Using Home Equity to Finance a Home Addition

Once you’ve done your research and talked with your family, then it’s time to consider your funding options. Here are some of the best ways to finance a home addition like an in-law suite.

1. Home Equity Loans

A home equity loan will give you a large chunk of cash you can use to finance the construction of your in-law suite. Your loan may have a fixed or variable interest rate. In general, home equity loans offer shorter maturities than the original mortgage you took out on your home (meaning you’ll have to pay them back faster).

2. Home Equity Lines of Credit

A home equity line of credit (HELOC), is a revolving loan. It works in a similar fashion to your credit card. Your lender will set aside a predetermined amount of money that you can borrow from at any time. During the “draw period,” typically five to 10 years, you can borrow as much or as little as you need to fund your in-law suite construction. Some HELOCs require you to pay back everything you borrowed as soon as the draw period ends. But most offer a payback period of up to 20 years, during which you pay back the interest and principal in regular installments.

3. Reverse Mortgages

Homeowners who are 62 and older have an additional option for financing the construction of their in-law suites: a reverse mortgage. This program allows them to borrow against their home equity without having to pay an additional monthly fee. But there is a catch: The loan has to be repaid as soon as the borrower passes away or moves out of the home. This is usually accomplished by selling the house. If you want to leave your home to children or other family members, this may not be the best option.

4. Home Equity Investments

Unlike traditional home equity loans or lines of credit, there are no monthly payments or interest when you use a home equity investment product like Hometap. Instead, you offer the equity investment provider a share in the future value of your home in exchange for a lump sum of cash. You get the money you need now to finance your in-law suite, without having to deal with a new loan or credit program.

If you’re looking for the best way to finance a home addition, the answer isn’t one-size-fits-all. It will depend on your financial goals, you, and your property.

If building a home addition makes sense financially and emotionally for your family, compare your funding options to determine which solution is best for you.

Take our 5-minute quiz to see if a home equity investment could be the solution for you to finance your home addition.

YOU SHOULD KNOW…

July 28, 2019March 22, 2023

5 Home Renovations to Complete This Summer (And 2 That Can Wait Until Fall)

Warmer temperatures, more sunlight, and, in many locations, less precipitation make summer one of the best times to complete home renovations as it’s more likely that your project will be completed in less time with fewer delays.

If you’re looking to sell your home, these renovations may help increase your home’s value. If you plan to stay in your home, it’s still the ideal time to complete projects so you can enjoy your home to the fullest.

Here are five home renovations to complete this summer, plus two that can wait until fall.

1. Improve Your Outdoor Patio or Seating Area

If you don’t have the budget, or room, for a full deck, you can still create a seating area that fits your space and allows you to enjoy the longer, sunnier days of summer. FortuneBuilders shared several ways to make your outdoor space more appealing without breaking your budget, including DIY furniture out of concrete blocks and foam pads. Add a fire pit to the middle of your new seating area and you have an area for entertaining guests.

2. Replace Your Windows

Your old windows can cause you to spend 10–25% more on your energy bills. But how do you know if they’re due for an update? If you’ve felt the draft in the winter, you may know it’s time.

However, Forbes explains that if they’re broken, warped, or damaged, or your home needs a makeover, it’s time. Bob Vila also noted if you added caulking last year and you still felt the chill, it’s time to replace them. The good news is that you can expect to recuperate much of the cost of window replacement by increasing your home’s resale value.

3. Fix or Install a New Door

If you’ve noticed doors in your house that are harder to open than usual, now is the time to fix it. It’s common for doors to swell in the warmer, more humid summer months, which may cause them to stick. According to HomeAdvisor, a sticking door is easily fixed with a little sanding. However, if your door is sagging it may require changing the hardware that’s used to hang the door. If the door is damaged, make sure you replace it with a door that is a good fit for your climate.

4. Upgrade (or Replace) Your Driveway

As Eppraisal.com notes, driveways are a major part of your home’s curb appeal. Summer is the time to make updates, like refinishing your asphalt or concrete driveway or completely change its look. Need more parking for guests? Make your driveway wider. Interested in a new material? Seashells, for example, pair well with beachside cottages.

5. Pressure Wash Your Home

Like a shower for your house, a pressure wash can remove dirt and sediment, instantly brightening the look of your home. Pressure washing also gets rid of organic material that can, if not treated, damage your home, including mold and mildew.

While you can rent pressure washers, it’s worth looking into professional services that ensure your home isn’t damaged and that all debris is removed.

Plan Ahead: Fall Projects

While you may see painting crews out and about town during the summer, it’s best to wait until fall to paint your house. You still want warm temperatures—between 50 and 90 degrees is ideal, according to Consumer Reports—but you also want drier weather. If you wait until it’s too cold, you may not get proper adhesion. If done while too hot, your paint will dry too quickly, creating the potential for a streaky paint job. The best temperature will depend on the specific paint you choose.

You’ll also want to wait until fall for floor repairs. As Real Simple points out, summer’s heat and moisture can wreak havoc on your floors, particularly if they’re hardwood. By waiting until fall, you’ll be able to see the real extent of the repairs needed. Sand down and refinish scratched or damaged floors, but plan to replace boards that are deeply scratched. Unsure what’s needed? Call in a professional.

Fund Your Renovations

You have your home renovation to-do list, but not everyone has cash on hand to make the necessary improvements. One option is to tap into your home’s equity via a Hometap Investment. In exchange for a share of the future value of your home, Hometap will give you the cash you need to get the job done.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.