Money to build on

By STEPHANIE LEE Staff Writer

Published: 12:00 a.m., Sunday, December 5, 2010

When their youngest son left for college, the Hencheys realized their Coxsackie home suddenly seemed big -- too big for just the two of them.

But before Keith and Kate Henchey put their six-bedroom, ranch-style house on the market, they decided to make a few changes. Last month, they started replacing the front steps and laying down beige carpet in their bedrooms. New storm doors, closet doors and flooring are on the way.

As for the bill -- an estimated $3,000 to $4,000 -- the Hencheys are footing it on their own. "It's one of the things we've been saving up for," said Keith Henchey, 53, executive director of Good Samaritan Nursing Home in Delmar.

Whether undertaking a minor fix or a major renovation, homeowners have a variety of options to finance home improvement projects.

Installing energy-saving items this fall could lead to a lower 2010 tax bill. Under the federal Nonbusiness Energy Property Credit, homeowners can receive a tax credit that equals 30 percent of what they spend on eligible energy-saving improvements -- up to $1,500 for the combined 2009 and 2010 tax years.

For items such as certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass, the labor costs for installation are also covered, according to the Internal Revenue Service.

Other qualifying projects include energy-efficient windows and skylights, energy-efficient doors and certain types of insulation and roofs, though the installation costs are not covered. Those products must be manufacturer-certified as meeting standards of energy efficiency.

Interested homeowners may want to move quickly: to qualify for the credit, they must be put into service by the end of the year.

Green Jobs-Green New York, a program through the New York State Energy Research and Development Authority and Energy Finance Solutions. Rolled out in November, the low-interest loans for energy-efficient improvements can be as much as $13,000 per owner and be repaid over five, 10 or 15 years.

Energy $mart Loans are loans of up to $20,000 with a reduced interest rate.

Borrowers can refinance, or replace their current mortgage with a new loan that has a more favorable interest rate and more manageable terms. They can also take out a home equity loan -- usually a fixed-rate loan for a specific amount of money, requiring regular payments over the life of the loan.

If a homeowner has enough equity, taking out a home equity loan could be a good option, said John DeCelle, chief marketing officer of SEFCU, one of the largest credit unions in upstate New York. "There could be tax benefits, as well, to having a home equity loan," he said. "They might have the ability to write off some interest."

Many homeowners may be eligible for a tax deduction on their home mortgage interest -- defined by the IRS as any interest paid on a loan secured by their home, such as a first or second mortgage, a line of credit or a home equity loan. How much one can deduct depends on the date of the mortgage, the amount and how the mortgage proceeds are used.

But taking out a home equity loan to finance a few improvements could be like "putting two tires on the car when you need four," said Anthony Gucciardo, an associate broker with Hunt Real Estate in Loudonville.

"If a house needs a ton of work or a considerable amount of work, it doesn't make sense to do one or two rooms," he said.

Home equity lines of credit offer the flexibility of borrowing multiple times over a period of time, which DeCelle says could be useful for, say, incremental payments on a project. These typically involve variable, rather than fixed-interest, rates.

The Hencheys considered taking out a loan to finance more substantial renovations on their 1987 house on Matthew Lane, which they bought for about $80,000 and estimate to now be worth $200,000.

"We thought about it, but it didn't make sense to go further into debt just yet, if we're not going to get a great return on the investment," Henchey said.

Another option is store credit cards that offer special deals at home-improvement suppliers, such as the Home Depot, Orchard Supply Hardware and Menards. A Lowe's credit card gave Monica and Rob Salisbury of Ravena the push to remodel their bathroom after years of talking about it. There is no interest on major purchases if the amount is paid in full within 18 months.

The Salisburys saved about $6,000 over a year to re-tile, re-sheetrock and install new appliances, said Monica Salisbury, 33, an administrative assistant for Adecco Engineering and Technical in Schenectady. She advised enlisting friends and family members instead of contractors, who can multiply the cost.

"If you plan a project, save a while, don't rush into it and make sure you have money," she said. "And whatever you think it's going to cost, it's going to cost more."