Nearly half of homeowners (48%) plan to renovate their homes in the next two years, and a third of those homeowners expect to spend more than $50,000 on their renovations, according to recent research from TD Bank.
The national survey of more than 1,800 homeowners examines trends in home equity usage and home renovations. According to findings, many homeowners are dipping into their savings (48%) and checking accounts (34%) to fund renovations, many are establishing substantial budgets and seeking financing options. A quarter (25%) say they will borrow through a home equity line of credit (HELOC), and a similar portion will utilize 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 did not know 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 observed in respondents’ priorities and strategies for renovating.
More than 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 more likely to prioritize cost first (43%). And while 27% of the youngest respondents said that renovation speed was their first priority, it was 0% for boomers.
When it comes 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 looking to save on labor costs. Meanwhile, 60% of boomers said they would hire professionals to carry out all of the work.
Across the board, homeowners said they are planning to renovate their bathroom (26%) and their kitchen (25%) more than any other area of their home. Nearly half (48%) said improving the quality of their outdoor space was a top reason to renovate.
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