Interest Rates and Construction Costs
Many Homeowners start thinking about projects in the Spring. To begin a project in Spring, you should start planning the prior Fall/Winter. In our first blog, we discussed the practical aspects of planning and designing a project. There are many reasons to get a head start on your project planning. Aside from contractor scheduling, designing, and permit applications, there are the financial decisions to be considered.
Remodeling your home is a significant decision that should be based on a variety of factors, including your personal circumstances and long-term goals. While interest rates and construction costs are important considerations, they are not the only factors to take into account.
Here are some key points to consider:
Assess your current financial situation and future plans. If you have the financial stability to proceed with a remodeling project despite higher interest rates and construction costs, it might still make sense if the benefits outweigh the costs. This includes whether or not you are confident in your current job and know if you have an opportunity for a pay raise in your future.
Consider your long-term goals for your home. Are you planning to live in it for many years, or do you intend to sell in the near future? If you plan to stay in your home for a long time, the current interest rates may have less impact on your decision, as you'll enjoy the benefits of the renovation over the years. Also, consider the neighborhood that you live in. Are property values increasing? If so, investing in a remodel could still make sense, as it may increase the resale value of your home.
Evaluate your budget for the remodeling project. If you can secure financing at a reasonable rate, and you have a solid plan in place to manage the construction costs, you may be able to proceed even with the higher rates.
While construction costs are high now, we do not expect them to be lower in the future. All indications are that they may rise in the future or at best stay the same. However, it's essential to have a detailed cost estimate and a buffer for unexpected expenses when budgeting for a remodel. Construction costs have risen due to the cost of labor and materials and will not ever be coming down. Once prices go up, they rarely come down.
Review your current living situation and whether a remodel would significantly improve your quality of life, such as adding more space, improving energy efficiency, or enhancing functionality.
With interest rates being higher than they have been in over 20 years, the cost to finance is a factor. Sometimes the payment on a construction loan is higher than what you can or want to spend. There are two ways to approach this issue. One is to wait until rates come down. This may not happen for a year or two. The second option is to move forward and make higher payments until rates come down and then to refinance the loan to get a lower payment. Many people refinanced multiple times over the last 5 years as rates drifted lower.
Consider the urgency of your remodel. If you have immediate needs, waiting for lower interest rates may not be practical. The availability of contractors and construction professionals may also be a factor. Sometimes, waiting for lower construction costs might mean waiting for a long time to find an available contractor.
Finally, trust your intuition. If you are comfortable with the financial aspects of the remodel and believe it's the right time to make improvements to your home, then contact us today at Inquire@CalyxBuilds.com !