Adding equity to your home?

Question

My driveway is dirt and gravel. I'd like to lay concrete and pave it. Will that increase the equity in my home? By how much, do you think?? Also, I'd like to add either a front or back porch to the house. Will that increase? The reason I ask is because I'd like to get rid of the PMI. If I'm not mistaken, when I build (or pay off) 20% equity in my home, I can get rid of it.
Thanks for any advice and help!

Answer 1

Yes both will add equity, although how much is a numbers game. It depends on where you live, the current value of the house, other upgrading projects, the quality of work (poor quality may even degrade your equity) etc.

You are right about cancelling the PMI, but heres a link for a little more info.

http://homebuying.about.com/od/pmi/

A word of advise, there are ways of paying off your mortgage quicker, without really forking out your life savings.

1) Make 2 payments instead of 1, without spending more

Ex: Your mortgage is 1000.00, due on the 30th. Pay 500 on the 15th and 500 on the 29th.
Why?
The first payment (15th) is no longer a factor in calculating that months interest. It saves A LOT, allowing you to pay off your loan 5-10 years earlier. Make both payments BEFORE THE DUE DATE! Otherwise it backfires.

Want to save even more? Make your next payment on the due date. Within the next few days, make a half payment, and two weeks later make the other half. Continue half payments from there, making sure both are paid weeks before the due date. This way, you are removing as much interestable principle as possible. Pay it off about 10-15 years earlier.

2) Make 2 payments instead of 1

Got a 1000.00 mortgage? pay 2000.00, or even 1500.00 per month, But talk to your lender and make sure the extra payment is going towards the principle, not the interest. Pay it off in 5-10 years.

Answer 2

There are a large number of factors that will determine whether improvements will add value to your home.

Your best source of information is to hire a real estate appraiser who is a Member of The AppraIsal Instiute to give you an estimate of what influence the home improvements that you are considering will have on the fair market value of your home.

In general, unless you are very sophisticated and have a great deal of experience buying and selling homes I do not recommend making improvements merely to increase the value of your home.

I recommend that you make the improvements that you want for your own enjoyment of the home.

Do you really want that concrete driveway or the front and back porch for your own use of the house?

In my experience, improvements to the kitchen and baths often return more in fair market value than improvements such as driveways and porches.

Answer 3

Paving the driveway will be next to worthless when appraising for increased equity. The porches won't be much better. In order to increase equity substantially, you're going to have to add square footage to the house.

Also be aware that any money you spend on such improvements never returns increased equity to the amount that you spent to make the improvements.

Answer 4

Before doing anything, have your home appraised so that if its worth that much more now you can refinance it and get rid of PMI that way. At this time you can also pull money out of the equity (cash out) to pave the driveway if you want, but get it appraised first as right now the market is not good and you don't want to throw good money after bad.

Answer 5

With the market doing what it's doing, it may not be a good idea even if you can find a company to do it. If the value of your house goes down, then you may end up owing more than it's worth, which means that you would owe the balance even if it's repossessed. You need some counseling to avoid all this debt. Your house is not an ATM machine.

Answer 6

It maybe won't effect the value, it would just give it better curb appeal. It is easier to obtain a loan when it looks nice to the appraiser. Most appraisers have opinions that can effect the lenders decision, that in turn you could get more equity.

Answer 7

Im not sure how much it will increase it but I know it will. My dad just did that with his house and refinanced it. Him adding a porch, pool, blacktop, a shed....they told him that helped alot.