Avoid Money Mistakes

Avoid Money Mistakes. Information for home design and remodeling.

Request lien waivers. In addition to a written contract, a responsible contractor can provide documentation releasing you from financial responsibility for his or her purchase of materials.

Otherwise, if a contractor goes out of business, an unpaid materials supplier might be able to place a claim on your property for the materials the contractor used. If unpaid, such a lien could make the subsequent sale of your house more difficult.

Have your financing in order. Financing your remodeling project can be just as complex as deciding on floor plans.

Saving for a project is desirable. But most experts also recommend using home equity loans or lines of credit, the interest on which is deductible, rather than borrowing against 401k retirement plans, whole-term insurance policies, or other assets. (Consult a financial planner for recommendations specific to your needs.) Go to Financing a Project to learn more about getting money for your remodel.

A home equity loan borrows against the amount of your home's value, minus the amount you still owe on your mortgage. A home equity line of credit is the same as a loan, except that you don't have to draw the full amount at any given time.

Don't go overboard. Right after "location, location, location," there's a real estate adage that says: You never want to own the most expensive house on the block, nor the least expensive.

In planning your remodeling, make sure to balance your wish list against comparable homes in your neighborhood. A luxury kitchen remodeling project, for example, might place your home outside the price range of likely buyers in the future.


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