10 Ways Wisconsin Homeowners Can Improve Home Value With a HELOC
With a Home Equity Line of Credit (HELOC) you can borrow against your home’s equity and use the funds for just about anything. HELOCs offer lower interest rates than you can obtain through a credit card, payday loan, etc.
Because a HELOC is a revolving line of credit, you can apply for one and use the funds immediately or wait until you need them for an upcoming need or emergency. You can typically borrow up to 80% of your home’s equity, which is the current value of your home, minus any outstanding mortgage you may have. Your HELOC limit will also depend on your credit rating.
The IRS allows homeowners to deduct HELOC interest costs of up to $750,000 from their income taxes, or $375,000 for those married and filing separately, if the HELOC funds were used to “buy, build, or substantially improve” a home. If you have a mortgage and a HELOC, your combined interest costs cannot exceed these deduction limits.Always consult a tax advisor for tax specifics.
Are HELOCs a Good Investment?
Many people use a HELOC to consolidate debts, such as credit cards, because a HELOC allows them to reduce their interest costs. Others might use a HELOC to pay for education costs, or as an emergency and contingency fund.
Some of the best HELOC uses in Wisconsin are for home improvements and upgrades that make your living quarters more enjoyable, reduce your energy costs, and improve their salability. Let’s consider how to improve your home’s value with a HELOC.
1. Winterproof Your Home
One of the best ways to use a HELOC in Wisconsin is to improve the winterproofing of your home for those cold Wisconsin winters. Things like weatherstripping, better-insulated windows and doors, insulating your attic, or replacing your heating, ventilation, and air conditioning (HVAC) system can not only reduce drafts and make your home cozier in the winter; it can also save you money in the long run by reducing your heating bills. You could insulate your pipes and crawlspaces to avoid the cost and inconvenience of having your pipes freeze and burst on a cold winter night.
2. Reduce Your Energy Costs
Of course, there’s more to home energy costs than winter heating bills. You could use a HELOC to buy energy-efficient home appliances and install energy-efficient LEDs, which last longer and will reduce your electricity bills. Installing solar panels and other clean energy improvements could earn you an IRS tax credit worth 30% of your cost of installing:
- Solar electric panels
- Solar water heaters
- Wind turbines
- Geothermal heat pumps
- Battery storage technology
This tax credit isn’t allowed for business properties. If you use part of your home for business purposes, you can deduct the full credit if the business use of your property is less than 20%. If your business uses more than 20% of your home, the credit is based on the share of expenses allocable to nonbusiness use.
Tax credits for fuel cells are limited to $500 for each half-kilowatt of capacity. If more than one person lives in the home, the combined credit for all residents can’t exceed $1,667 for each half kilowatt of fuel cell capacity. This credit is not available for second homes.
These credits are nonrefundable, so your credit can’t exceed what you owe on your income taxes; although you could carry forward any unused access credit and apply it to your tax returns in future years. These energy tax credits will be reduced to 26% starting in 2033.
3. Building a Four-Season Room
If you have a three-season room or a porch that you’d like to use year-round or just want to increase your living space, a HELOC can be an affordable way to pay for it. Not only can this make your home more enjoyable to live in, but it can also increase your property’s resale value and increase its appeal to potential buyers. You might also consider adding a bathroom or a rec room.
4. Expanding or Upgrading a Mudroom
With Wisconsin’s snowy, muddy seasons, a well-designed mudroom with durable flooring is a great place to keep dirty boots, jackets, and outdoor gear. It’s also useful for keeping sporting equipment and pet-related items. This can help you organize your things and keep the rest of your home clean by giving people a place to sit down and take off their snowy or muddy boots. It also increases the value and salability of your home, especially in a state known for its love of the outdoors.
5. Adding a Heated Garage
Imagine having a garage where the snow and ice can melt off your car, and your car battery won’t die overnight during a cold Wisconsin winter. A heated garage can be especially beneficial if you have a flying bedroom above it, or if you ever use the garage for car repairs, hobbies, food storage, laundry, or as an exercise or recreation room.
6. Kitchen Remodel
Upgrading and renovating a kitchen can add significant resale value to your home. With home remodeling, kitchen improvements are considered one of the best returns on investment. You might update or install a microwave and get new flooring, or do a full-scale remodel with all new cabinets, countertops, flooring, and appliances. If you’re thinking of selling your home, an outdated kitchen can significantly reduce its resale value and appeal.
7. Bathroom Upgrades
One of the top reasons for bathroom remodeling is to improve safety. An outdated bathroom could have potential hazards such as uneven or slippery floors, lead paint, mold, and mildew. While improving the safety of your bathrooms can benefit the whole family, it’s of special interest for older citizens, as many of them want to remain in their homes for as long as possible.
Safety features could include anti-slip flooring, grab bars, handheld showerheads, and walk-in tubs. Higher toilet seats are also popular. Bathrooms can be one of the most dangerous.
Of course, a bathroom remodel doesn’t have to be entirely about safety. You upgrade to more modern fixtures with dual sinks and a walk-in shower. You might also convert a half bath into a full bathroom for more convenience and resale value.
8. Finishing the Basement
A finished basement can add both functional and resale value to a home. Not only does it provide additional living space, but you could also use it as an entertainment area, home office, or extra space for guests.
9. Roof Replacement or Repairs
A roof that’s beyond its service use can lead to all sorts of problems. That’s why the snow and ice that Wisconsin faces each winter, as well as summertime storms, make a new roof a smart and long-lasting investment that protects your home from leaks and water damage while increasing resale value. The benefits of a new roof include:
Improved Resale Value and Appeal
If you plan on selling your home, one of the first questions people will ask is about the state of your roof and how old it is.
Keep Your Insurance Coverage
Most homeowner’s insurance policies offer no or limited coverage on roofs beyond 20 years of age.
Reduce Your Heating and Cooling Bills
A new roof can improve your home’s heating and cooling efficiency by improving insulation, ventilation, and solar reflection. You could also use a roof replacement as a chance to install solar panels, which would also reduce your energy costs.
10. Installing a Backup Generator
While many Wisconsinites have a portable generator in case of power outages, installing a backup generator offers convenience and improved safety while also providing peace of mind, improving your home’s resale value, and avoiding the expense of lost and spoiled food or a flooded basement because your sump pump couldn’t operate.
Portable generators can keep your refrigerator running, but they can’t provide enough living power for the average home. They must also be manually started and monitored and can use from 12 to 20 gallons of fuel daily. A portable generator must also receive some protection from the elements, while also being far enough from the home and well-ventilated. Portable generators present multiple hazards, such as carbon monoxide poisoning, electrocution, and fires.
A standby generator can be connected to your home’s electrical system and will switch on automatically during a power loss. When the car comes back on, your generator shuts off and your home switches back over to the electrical grid. You wouldn’t have to be home to make the switch, and a standby generator could be large enough to power many of your home’s electrical needs. They can run on liquid propane or natural gas, so if your home uses either of these fuels, you probably wouldn’t have to worry about having enough for your generator.
Find Out If a HELOC Would Work for You
If you’re considering a HELOC, please contact one of our mortgage lending officers who can help you decide if a HELOC is a good idea for you. You can also stop by one of our local branches in Waupun, Fond du Lac, or Oshkosh to explore your home lending options or start the application process.