Monday, October 31, 2016

Why You Should Green Your Home Before You Refinance

Lots of people wonder if this is a good time to refinance, and it's a good question. Today, I'm happy to feature another great post by guest blogger, AJ Earley, who offers a unique perspective for you to consider.

Millions of Americans refinance their homes every year, and it’s no wonder, considering that billions of dollars are lost every year by the ones who don’t refinance. Everyone’s situation is different, and plenty of people pay off the life of their mortgage without ever pursuing a new loan. However, if you’re in a position to actually save money by doing so, it just makes sense to at least check into it. 

If you’re broaching a point in your life where a refinance might be on the horizon, it’s also the perfect time to consider “greening” up your home a little bit. While many people refinance for the sole purpose of using the equity to pay for renovations, there are so many benefits to upgrading your home before you refinance

The first is the fact that you will definitely receive a higher appraisal, meaning a higher property value when you go to refinance. Generally, your investment will have a much higher payoff in the appraisal process, but there are a few home improvement projects that have a higher payoff than others. Anything that makes your home more energy efficient, environmentally friendly, “smart,” or generally “green,” almost always falls into this category. Plus, your investment will pay off double if you go the energy efficient route: once when your home is appraised at a much higher value, and again every time you get a tiny or non-existent power bill. I’ve even heard of people getting paid by the power company monthly because their homes created too much energy. 

Image by Kevin Phillips

Another benefit of receiving a higher appraisal rate is that a better refinance deal will result in even more money for you to invest in greening your home more down the road. Say you’ve got your eye on a $75,000 complete solar energy system for your home, but you only have $30,000 to invest. If you invest that $30,000 in other areas, that could result in an appraisal that’s $50,000 to $80,000 higher than your current value, which is more equity that could end up in your pocket… or in the hands of the company selling that snazzy solar system. 

As mentioned before, some home improvements result in much higher valuations than others. At the top of the list of renovations that return on their investment is kitchens. Having an updated kitchen means serious bonus points come appraisal time, but having the latest in energy efficient appliances and technology will boost those numbers even more. 

Window and door replacements are also well worth the money, as both give you a chance to improve the look and energy efficiency of your house at the same time. Both doors and windows have come a long way in the past decade, and they’ll also cushion your wallet in more ways than just a higher appraisal: replacing old windows with energy star rated ones can save you almost $500 a year in heating and cooling bills. If you want to save even more, open up those windows when the weather is nice! 

A fresh coat of paint all around the house, as well as new carpeting or flooring also yields a high return, but make sure you opt for products that don’t contain toxic VOCs (volatile organic compounds.) Generally, hard floors are considered “greener” than carpeting, as they last longer between replacements and require less electricity and cleaning products to maintain, but you can find carpeting made from recycled materials. Bamboo flooring and tiles made of recycled glass are also sustainable (and attractive) options that will increase your home’s value. 

Revival Engineered Locking Bamboo

Adding an additional bathroom, especially to an older home that has a smaller ratio of bathrooms to bedrooms than we see in recent years, is another home improvement project that yields a great return, and it’s also another chance to make your home more eco-friendly. There are so many ways to create a greener bathroom: first off, install a low-flow toilet with a dual flush mechanism to reduce water waste, or even a hybrid where the gray water from the bathroom sink is recycled into the toilet bowl. When it comes to hot water, you can opt for a solar powered water heater or install a waste-heat recovery system, which uses the warm water going down the drain to preheat the rest of the water. You can fight mold and mildew a more natural way by making sure there are windows for ventilation and by using naturally mold-resistant materials like cork, marmoleum, natural clay, and water-resistant woods like cedar. 

Don’t forget that there are also lots of ways to make your home more energy efficient for under $100, and if you’re planning to refinance and want to have a greener home to boot, consider doing at least some of those renovations beforehand and reap the rewards later on down the road.

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