Navigating Rising Interest Rates: Is Now the Right Time for Remodeling a Home in Seattle?

Seismic. No Relief. Losing Wealth. Worse Than You Think.

Those are some of the words and phrases included in headlines about rising interest rates for homeowners. Scary, right? We think remodeling a home in Seattle should be exciting and fun, not scary!

In this article, we’ll fight through the fear-mongering and empower you with the knowledge you need to plan a remodeling project through economic turmoil and rising interest rates.

Understanding the Impact of Rising Interest Rates

As interest rates fluctuate, they can have a significant impact on the overall cost of your Seattle home remodeling project. 

Higher interest rates typically lead to increased borrowing costs, affecting your ability to secure favorable financing options. If you plan to take out a loan or use a home equity line of credit (HELOC) to fund your remodeling project, the interest rate on the loan will directly affect the overall cost of borrowing. 

As interest rates rise, the monthly payments on your loan would likely increase, potentially impacting your budget and the feasibility of your project. Before you begin working with a contractor, consider connecting with a financial advisor or lending expert to help you define a project budget that is right for you.

One common benefit of home remodeling projects is the increased property value. Higher interest rates can actually negatively impact the return on investment if you plan to sell your home in the near future. For example, potential buyers may have a more difficult time securing financing, which can affect the demand and resale value of remodeled homes. 

You will want to consider how long you plan to live in the home and the potential impact a remodeling project will have on the long-term value of your property before deciding to move forward.

Evaluating Remodeling Costs in Seattle

It’s crucial to spend a considerable amount of time researching costs when planning a home remodeling project. Factors such as labor, materials, and local permits can all contribute to the overall expenses. 

Seattle is a vibrant city with a growing population and a competitive real estate market, which has influenced renovation costs. For example, the 2023 Cost vs Value report shared that the cost of a mid-range bathroom remodel was 33% higher in our city when compared to national averages. Regardless of what your project entails, expect to pay higher than average when remodeling a home in Seattle.

In an effort to help you plan for your remodeling project, we have a remodeling cost guide available to download. Click here to request a copy of our cost guide. 

Fully understanding the cost to remodel in Seattle can help you establish savings goals, work with financial lenders, and plan for your home improvement projects.

Exploring Remodel Payment Options

Given the potential impact of rising interest rates on borrowing costs, it’s worth exploring various payment options for your remodeling project. 

If you’ve been living in your home for a while, you’ve likely built up some equity. Lenders will often allow you to borrow money against the portion of the home you actually own. 

With a home equity loan, you receive a lump sum upfront which can be helpful when determining your project budget. 

A home equity line of credit provides you with a revolving credit account that you can draw from as needed. Each withdrawal may require additional documentation or proof of completed work before the lender releases the funds which can potentially slow down the construction process.

Interest rates for these types of loans are typically lower than other forms of consumer credit, making them an attractive option for financing a remodeling project.

It could go without saying, but paying for your remodeling project in cash or using your savings is almost always the most cost-effective option while interest rates are high. By using your own funds, you can avoid interest charges and financing fees associated with bank loans or HELOCs. 

In 2022, 82% of homeowners paid for renovations using savings rather than loans, and that number is likely to increase as long as interest rates continue to climb. 

If you plan on using cash savings to finance your project, it’s critical to analyze your budget to ensure you have enough set aside to cover the project costs and its contingencies without putting your financial stability at risk.

Working with a Seattle Contractor

Partnering with a reliable and experienced contractor is crucial to the success remodeling a home in Seattle. 

As you consider different contractors, prioritize those who have a proven track record, a solid process, and can showcase their expertise in design-build services. Review their portfolio of completed projects to see if they align with your priorities and vision. A Seattle contractor who has successfully navigated projects similar to yours can help optimize costs even with rising interest rates.

Ensure that the contractor you choose is properly licensed and insured. Being licensed means that a contractor adheres to local regulations and professional standards. Being insured means that both you and the contractor are protected in case of any accidents or damages during the remodeling process. 

The Washington State Department of Labor & Industries has a free tool you can use to verify any contractor or tradesperson. Verifying these credentials gives you peace of mind that you’ll be working with a reliable business that is committed to maintaining high-quality standards.

Online review platforms like Houzz are also a great resource to hear directly from homeowners who have worked with the contractor. These reviews can provide valuable insights into their communication skills, workmanship, professionalism, and ability to meet deadlines and budgets– all key traits for a successful remodeling partnership. 

Timing Your Remodeling Project

So we’ve already determined that rising interest rates do raise the overall cost of remodeling a home in Seattle if you are funding it with a loan or line of credit. But is there anything you can do to avoid interest rates altogether? Maybe. Strategically timing the execution of your project could be the difference between several percentage points of interest. 

Interest rate decisions are typically based on a range of economic factors, including inflation, employment, and GDP growth. Even political cycles can indirectly influence interest rates due to shifts in investor sentiment, market confidence, and fiscal policies like government spending, taxation, and budget deficits. 

Interest rates are generally in an indefinite state of fluctuation based on a number of factors, so you can reasonably expect rates to fall again some time in the future. Historic patterns can help provide some insight into when that may be, but they cannot accurately predict future rate movements. It’s important to follow federal banking policies and consult with a financial expert if you want to be the first to know about falling rates. 

If you plan on using a loan or line of credit to fund your project, it may be highly beneficial to have finalized designs and a detailed financial proposal before approaching your bank. By going through a preconstruction phase with a contractor, you will have more accurate cost estimation which can more accurately represent your financing needs, leading to a more straightforward loan application process.

The added benefit of going through a preconstruction phase is project readiness. Depending on the complexity of your project, creating project plans, getting detailed pricing, and getting permits to build can be time consuming. If interest rates fall before you have detailed project plans, do you really want to wait 6 months to get started?

While some contractors require a hefty non-refundable fee to obtain project drawings and a detailed financial proposal, we’ve created an extremely low-risk phase 1 process that focuses on helping you determine the best way to move forward. Read more about the Harjo Construction process here. 

Rising interest rates can be a concern for any Seattle homeowner who’s considering a remodel. However, by understanding the impact of these rates, evaluating remodeling costs, exploring payment options, and partnering with a reputable builder, you can make an informed decision about when to start your project. 

Remember, timing is crucial, but proper planning and working with the right professionals can help you achieve your dream home while managing costs effectively. 

Are you ready for us to transform your Seattle home into the space you’ve always envisioned? Contact us today!