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Let's say I just bought a home for around $200,000. It appears that if I put $25,000 into it in order to improve the parts that need it (furnace, roof, driveway, some basic home renos) I could bring its value up to those on the same street which is closer to $250,000, but I would have to borrow the $25,000 in order to do that. What is the best way to approach a lender?

I could rack it all up on a credit card, but I'm assuming there is a cheaper alternative.

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    If you haven't financed the house yet, consider getting estimates from contractors for the improvements and an appraisal with the improvements. Then you can get a home loan that covers the improvements based on the value of the improved home. (This is usually the best option if you don't plan to own the home for very long.) – David Schwartz Nov 3 '16 at 17:11
  • You should put that as an answer, not a comment, @DavidSchwartz. So we can vote on it. – Xalorous Nov 3 '16 at 17:12
  • @Xalorous Well, he said "let's say I just bought a home", in which case it would be too late to do that. Also, the rates for such loans are a bit higher (0.5% or so) than the rates for regular loans, so he may not want to do that if he plans to keep the home for ten years or more. – David Schwartz Nov 3 '16 at 17:13
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    It's extremely unlikely the money you spend, will add even one dollar to the value of the house. – Fattie Nov 3 '16 at 20:04
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    JJ - for sure, but "furnace, roof, driveway, some basic home renos..." I believe in this case, it's extremely unlikely the money OP will spend, will add even one dollar to the value of the house – Fattie Nov 7 '16 at 21:28
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Be careful that pride is not getting in the way of making a good decision. As it stands now what difference does it make to have 200K worth of debt and a 200K house or 225K of debt and a 250K house? Sure you would have a 25K higher net worth, but is that really important? Some may even argue that such an increase is not real as equity in primary residence might not be a good indication of wealth.

While there is nothing wrong with sitting down with a banker, most are likely to see your scheme as dubious. Home improvements rarely have a 100% ROI and almost never have a 200% ROI, I'd say you'd be pretty lucky to get a 65% ROI.

That is not to say they will deny you. The banks are in the business of lending money, and have the goal of taking as much of your hard earned paycheck as possible. They are always looking to "sheer the sheep".

Why not take a more systematic approach to improving your home? Save up and pay cash as these don't seem to cause significant discomfort. With that size budget and some elbow grease you can probably get these all done in three years.

So in three years you'll have about 192K in debt and a home worth 250K or more.

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    Why not take a more systematic approach to improving your home? Save up and pay cash as these don't seem to cause significant discomfort. With that size budget and some elbow grease you can probably get these all done in three years. I was going to answer similarly to this. Also, he should budget somewhere around the 25k mark every 4-6 years to cover maintenance. AC, furnace, plumbing, roof, wiring. Something's always wearing out. If a year's maintenance is not used, consider using for an improvement, or sock it away in a stock portfolio. – Xalorous Nov 3 '16 at 17:19
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It depends on your equity(assets - liabilities). If you have a lot of equity, banks will be happy to lend you money because they now they can always seize your assets. If you don't have a lot of equity another option is to go to hard money lenders. They charge high rates and some of them lend-to-own, but is an option. And consider what Pete said, you might be a little optimistic.

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