Surprising Benefits You May Not Know When Increasing Your Home Value

Your home is probably your biggest asset, so maximizing its value is only logical. Time automatically increases your home's value, as do many home improvement projects. You can upgrade your home by taking on small projects, such as decluttering, or major ones, such as renovating your kitchen. Your return on investment for each project will vary depending on factors such as how much it costs and the demand in your geographical area. The benefits of your home's worth going up are most apparent when you're selling, but there are also significant benefits even if you're planning on staying in your house long-term. When you're considering renovations or other measures that will add value to your home, understanding these benefits can help you make an informed decision.

Some of these benefits, such as dropping private mortgage insurance, can put more money in your pocket every month. Others, including increased home equity, can allow you access to more funds for large home improvement projects, like putting in a pool or installing energy-efficient windows. These projects, in turn, can raise the value of your home even more. 

The higher the value of your assets, the higher your net worth will be. Although your net worth is primarily a number on paper, it can help you direct your overall wealth-building strategy and provide extra security in the event of financial hardships. When your home's value increases, it increases the amount of equity you have in it, which gives you more options financially. Many homeowners who buy their houses with less than a 20% down payment have to pay for private mortgage insurance, which can cost several hundred dollars every month. However, you may be able to drop this extra expense and lower your mortgage payment when your equity reaches 20% of your home's value, even if you haven't paid off 20% of your home's original selling price. That means if you complete a home improvement project that increases the value significantly, you could surpass that 20% amount and get your PMI removed by your lender.

Increased equity may also give you access to a larger home equity line of credit (HELOC), if you need it. Your lender will look at how much equity you have in your home as one factor in deciding the size of your HELOC. This can be great if you need the money, but it will decrease the amount of equity you have, so it will eliminate some of the other benefits. On the other hand, if you use the money to fund a home renovation, it can add more value to your house and give you more enjoyment while living there. The housing market can be volatile, but as the potential selling price of your home goes up, you'll have more protection from a down market. If you need to sell, you can still make a profit.