The Federal Reserve is making headlines as it considers cutting rates for the first time in years now that inflation seems to be slowing down. If it were to happen, this change would provide relief for many Americans in the form of lower interest rates on mortgages, auto loans, and credit cards. The upcoming rate cuts also offer a great opportunity for homeowners to improve their home’s value by building equity.
About the Upcoming Rate Cuts
The Federal Reserve (the Fed) is the central banking system of the United States. It’s responsible for setting interest rates, overseeing monetary policy, and managing the American financial system. In recent years, the Fed has continually raised interest rates to fight against growing inflation. But now that inflation is slowing down, discussions of a rate cut have begun.
For now, the Fed is considering a cut of 0.25 percentage points in September of 2024. But they don’t expect that to be the last one. With the benchmark rate at a decades-long high, additional cuts are in the works. And while the Fed’s benchmark rate doesn’t directly affect home mortgages or equity loans, its influence tends to be impactful.
Home Equity Loans and Lines of Credit
So, how can homeowners take advantage of the upcoming rate cuts? As borrowing cash becomes less expensive, many might see this as an opportunity to make needed improvements to their home using a home equity line of credit (HELOC).
Taking out a HELOC now can help boost your home’s value when you’re ready to sell—or at least maintain it. Though rates might not be low enough to sell your home and purchase a new one, more people may feel comfortable taking out a HELOC to do some remodels for when they’re ready to move onto a new home.
Take Advantage of Lower Rates With These 6 Smart Home Equity Projects
We see home improvements as a win-win. You’re both increasing the value of your home at resale and making it more enjoyable to live in now. But keep in mind that a HELOC is best for bigger projects you can’t pay for out of pocket. If you want to be smart about using your home equity loan, consider using it to take on one of these home projects.
Remodel the Kitchen
The kitchen is one of the most used rooms in your house and is often a focal point for many prospective buyers. If you’re eager to renovate your kitchen, it might soon be the perfect time. With lower rates, you can borrow more for less and get the kitchen of your dreams.
Upgrade Appliances
Appliances are a big ticket item that can make all the difference, especially if your current ones are outdated energy suckers. Taking out a HELOC to invest in energy-efficient, sleek appliances can save you money on bills in the long run. It will also make your home more attractive to potential buyers.
Add Square Footage
A home addition is a huge undertaking with even bigger rewards. You can add an extra garage, a freestanding shop, extra bedrooms, or bathrooms. The possibilities are endless. Not only does it give you and your household more space to enjoy, but it will also improve your resale value when it’s time to sell.
Invest in Curb Appeal
There’s nothing quite like coming home to a house that looks beautiful and inviting—and home buyers agree. A 2020 study found that curb appeal accounts for up to 7% of a home’s sale value. On the average home, that’s about a $20,000 difference!
Renovate Bathrooms
You’ve heard it from everyone: kitchens and bathrooms are the selling point of any home. And it makes sense. They’re the most costly to renovate and the most frequently renovated rooms in a house. If you’re worried that all your bathrooms need a remodel, we suggest starting with your primary bathroom since it’s where most buyers find value.
Fix Your Roof
No one wants to buy a home with an old roof. They’re expensive and stressful to replace. If you can use a HELOC to fix your current roof or install a new one, you’ll reap the benefits when you decide to put your home on the market.
Summing it Up
The new federal rate cuts could be a great opportunity for improving your home value if you take advantage of these improvements. The lower borrowing costs can make your new kitchen & bathroom remodel, or even home additions, more affordable. Tapping into your home equity line after the rate cuts could mean that you are able to transform your home into your dream home now with higher resale value in the future. Let us know if you have any questions about planning your next home remodel. We would be happy to help you navigate financing options that are popular this year.
