Financing a Facelift

Financial expert tells you how to avoid the pitfalls of paying for a renovation.

Many log-home owners believe that once they move into the dream home they designed and built, it will be perfect forever. After a few years, however, you may decide it’s time for a makeover or even an addition. Perhaps you already live in a log home and find yourself in this position now. Remodeling, whether for cosmetic improvements or structural changes, is more popular then ever with all homeowners, not just those living in log homes.

Of course, like any major undertaking, the first thing to do is figure out how you will pay for your re-do. Not all houses can financially support a major remodeling project. While minor improvements or repairs will keep your home’s value from declining, it can be difficult to recoup the cost of major renovations until some time has passed and appreciation has occurred. Some remodeling choices have greater immediate value than others. T

he kitchen, bathrooms and master bedroom all enhance the value of the home when remodeled. Of course, these can also be the most expensive of upgrades, and if you overdo it or make it unique, you could have difficulty seeing those dollars come back to you if you ever do decide to sell. Adding square footage can benefit a house greatly, particularly if the home is an older one that is smaller than today’s buyers want or than other homes nearby. Just be sure not to expand too far past the size of the typical houses in the area.

Overbuilding not only makes it harder to recoup building costs, but also could negatively impact your ability to sell the home in a moderate or slow market. Buyers may pay a little more for a slightly larger home than others around it, but they are more likely to search for someplace with bigger homes in general rather than pay a large premium for a giant home among smaller ones. Pay careful attention to aesthetics and usability when planning your remodel. Not everyone is an expert on good design, but most people are critics when the design is poor. It’s important to preserve the architectural integrity of a log home so that it maintains curb appeal to future buyers. Be aware that adding odd-shaped rooms or causing strange traffic patterns might be OK for you, but they could drastically reduce the home’s marketability.

Try to finish all at one time. Partially finished projects often suffer devaluation problems, in spite of the owner’s good intentions. Remodels can be costly, and not everyone has sufficient savings to pay for work that can cost tens or even hundreds of thousands of dollars. If your house has equity in it that exceeds the cost of your remodel, you may be able to tap this equity to cover your remodeling costs. One popular way is through a home equity line of credit, or HELOC. HELOCs can be beneficial if your first mortgage is at a low interest rate and you’re not sure how much of the money you are going to use. HELOCS are large credit lines that allow you to draw money and pay it back as you wish. You pay only interest on the amount you draw off the line, so you can keep your payments down if you don’t need all the money.

More of this article appeared in the September 2007 issue of Log Homes Illustrated.

Kevin Daum is the author of the custom-home manual Building Your Own Home for Dummies and What the Banks Won’t Tell You: How to Get the Most Out of Your Mortgage. As president of Stratford Financial, he has financed hundreds of dream homes. He can be reached at