When you’re looking to upgrade your home, tapping into the equity with a home equity loan or line of credit makes a lot of sense.

In some cases, the interest on the loan might be tax deductible — and even if it isn’t, home equity loans typically carry a lower interest rate than credit cards or other types of loans. And if the upgrades increase your home value,  you may end up with more equity than when you started.

But, a lot of upgrades don’t appreciably increase your home’s value, and they might be better paid for with savings or by earning extra money to cover the costs. Another option would be to trade services with a contractor, if you’ve got skills that can earn money.

Wise Home Improvements

Certain home upgrades tend to provide more value than the actual cost.

Kitchen upgrades can offer great value. New lighting, modern appliances, and better storage can really increase your home’s value while also making your kitchen easier to use.

Bathroom renovations can also be a safe bet. Tile, a tub refresh, and, again, new cabinets, are great options. Fresh paint is also useful.

Paint in any room — or on the exterior — can offer good return on investment if you’re covering a funky or outdated color, especially if you do a lot of the work yourself rather than paying a professional.

Outside, you might want to invest in landscaping or patio or deck upgrades.

Home Improvements That Are a Bust

Trendy upgrades that may be out of fashion in the next few years don’t tend to be a good bet.

Wall-to-wall carpeting can also be a bad investment, as many buyers may plan to rip it out and replace it with an easier-to-clean laminate or wood floor.

Expensive upgrades, even in the kitchen or bathroom, might also be a waste of money, if they don’t fit the style of the home or offer the type of experience that is out of step with the home values in your neighborhood. For example, a full spa shower in a 1,000 square foot ranch home in a modest neighborhood might be nice, but these upgrades are not likely to bring you a better sale price. Same with a commercial grade stove or $10,000 refrigerator may not be a great value.

Now, if you’ve got the money for these upgrades and would love them, by all means go for it, especially if you plan to be in your house using them for a long time. But don’t go into debt or decrease your available home equity for them.

Got more questions about smart ways to use a home equity loan or line of credit? Give us a call at 800-722-2936. We can’t wait to talk to you about your needs.