Stellar Time For Home Equity Renovation Loans

A depressed economy may not be good for the mortgage or housing markets, but it's a great time to renovate. Prices for building supplies are going down, contractors are hungry for work, and interest rates are ridiculously low, thanks to recent rate cuts.

If you've been thinking of using a home equity line of credit (HELOC) or home equity loan to remodel or renovate, there's no time like the present to act on those dreams. Housing prices are down, and mortgage money is tight. Sales are slow, and even the National Association of Realtors admits that we're probably a year or more away from a significant rebound. But if you've accumulated equity in your property, this is a jewel of a time to convert a portion of that equity into tangible upgrades.

Contracting bargains

The Joint Center for Housing Studies at Harvard University estimates that some 700,000 fewer homes will be built this year than were constructed in 2005. The Commerce Department also reports a 25 percent drop in single-family house construction compared to about a year ago. That basically means that you can hire contractors for a discount, because they're all dressed up for work with nowhere to go. Offer them a job during this lull in the action, and you can get projects finished much less expensively now before the market bounces back. Once business gears up again, those same contractors will probably be too busy to even return phone calls, or take time out to provide bids. Architects are willing to take on smaller jobs that they would have passed on a couple of years ago, and other professionals in real estate-related fields are almost all eager for work opportunities. You can find bargains on everything from electricians to interior decorators.

Consider the cost of raw materials, also, in addition to the savings on skilled labor. Usually, construction materials go up in price, so you have to factor in an extra 20 percent to accommodate inflation as a project progresses. But, for example, the price of "oriented strand board," a substitute for conventional plywood, is about half of what is was just three years ago. That's a remarkable reversal, and the overall industry price trend may save you considerable cash.

Growing your home equity

Assets added now can translate into greater profits with higher margins once the economy regains traction, and using equity to grow equity is a time-tested strategy for increasing wealth. Homes that are already prepared for market will get top dollar, as tardy homeowners scramble to do needed repairs and long-overdue facelifts.
Or, perhaps you just want to improve your quality of life by enhancing your primary residence or vacation home. Use a home equity loan to finance the work, and you may qualify for additional perks in the form of tax exemptions for interest payments. Whatever your motivation, scheme, or plan, the time is ripe for making capital improvements to real estate.