Of those people who intend to remodel, 1 in 4 expect to finance it via a home equity line of credit, however, most say they’ll use savings (48%) or checking accounts (34%). Up to 50 % of homeowners (48%) want to renovate their homes in the next 24 months, and a third of those homeowners expect to spend more than $50,000 on their renovations, in accordance with recent research from TD Bank.
48% of Homeowners Intend to Remodel Within 2 Years
The national survey of more than 1,800 homeowners examines trends in home equity usage and home renovations. In accordance with findings, many homeowners are dipping into their savings (48%) and checking accounts (34%) to finance renovations, the majority are establishing substantial budgets and looking for financing options. A quarter (25%) say they will borrow through a home equity line of credit (HELOC), and a similar portion will use a personal credit card (24%) or a personal loan (18%).
“While there are many viable options for funding a renovation, a home equity line of credit is one of the most affordable ways to borrow,” says Jon Giles, head of Home Equity Lending at TD Bank. “During a HELOC’s 10-year draw period, it functions much like a credit card, whereby you can draw funds when you need them. But while credit cards typically carry interest rates around 17 percent, a well-positioned borrower seeking a HELOC can secure rates close to the Federal Reserve’s prime rate, which is currently around 5.5%.”
The survey uncovered several gaps in understanding home equity:
Nearly a quarter (23%) of homeowners said they could not define a HELOC.
Almost a third (32%) of homeowners weren’t sure the current equity in their home.
One in six (16%) homeowners did not understand the impact of fixed versus variable rates on monthly payments.
DIY or buy? A generational divide
While the desire to renovate spanned all audience segments, key generational differences were seen in respondents’ priorities and strategies for renovating.
Over half (54%) of baby boomers – those over age 55 – said appearance/quality of the final product was their top renovation priority, while 18-34 year-olds were very likely to prioritize cost first (43%). And even though 27% of the youngest respondents stated that renovation speed was their first priority, it was 0% for boomers.
With regards to tackling the renovations, 64% of respondents in the 18 to 34 age group said they would do some or all of the work themselves, indicating they are likely seeking to save on labor costs. Meanwhile, 60% of boomers said they would hire professionals to handle all of the work.
Across the board, homeowners said they are likely to renovate their bathroom (26%) and their kitchen (25%) more than any other area of their home. Nearly half (48%) said enhancing the quality of their outdoor space was a top reason to renovate.
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