Forget the old patio set and hammock-the traditional backyard is getting a makeover. Trendy homeowners are now creating additional living space by decking out their decks with modern appliances, wide screen TVs, and more.

Across America, "home sweet home" has become "home sweet backyard." Homeowners have taken to retrofitting their outdoor areas with all the modern conveniences of inside. The accommodations vary by regions, but most include outdoor kitchen appliances such as ovens, refrigerators, larger patios, and fire-pits. Colder parts of the country are also seeing heat-lamps and fireplaces.

If you're about to embark on your own backyard renovation, there are two financial considerations to keep in mind: the impact it will have on your home's value, and the best way to finance the improvements.

Added value or outlandish expense?

Make no mistake: A renovated backyard can do wonders for a home's resale value. Curb appeal can't be underestimated in the home buying market. People will fall in love with a house based on its looks, not on its furnace or water softener.

The great news about a revamped backyard is that it won't show up on your tax bill. Property tax assessors value your home based on its "livable" space, such as the inside of your house. At least for the time being, revamped backyards won't cause bigger tax bills.

On the other hand, you want to be careful not to go overboard in creating your outdoor space. You can cram your backyard full of top-of-the-line cooking appliances, but think pragmatically. You don't want your outdoor kitchen to cost more than your indoor kitchen. Although it will help sell your house, it's an expense you'll never recoup.

Financing Options

Renovating the backyard will be fun, but it won't be cheap. To finance your improvements, two popular options include the home equity line of credit (HELOC) and the home equity loan.

The HELOC works like a credit card-it's a line of credit based on your home's collateral, and it has a variable interest rate set by current market conditions. The home equity loan, on the other hand, is a fixed-rate, fixed-term product. The interest paid on either loan is generally tax-deductible. During times of low interest rates, HELOCs are extremely popular. With recent increases in rates, however, homeowners are once again turning to the fixed-rate product.

With either loan, a lender may tell you that you qualify for much more than you had considered borrowing. Be careful: tap only the equity you need. Borrowing additional funds for a trip to Hawaii sounds like fun, but it could over-extend your budget.

Blending the great outdoors with a home's great indoors can yield some exciting results-both aesthetically and financially. You can improve a home's curb appeal without increasing its tax assessment. Just be careful not to overspend on the accommodations, and be sure to use a tax-deductible home equity loan for financing. Remember those tips, and you'll have a great investment-indoors and out.