A new study suggests home improvement funding may actually make it harder for people to buy homes they really need.
Researchers at Cornell University’s College of Humanities and Social Sciences found that homeowners in their study who received home improvement loans with lower interest rates were less likely to buy the homes they actually needed.
“Home improvement financing may reduce the incentive to buy,” study co-author Robert J. Taylor, an associate professor of social work and economics, said in a statement.
“We suggest that the greater the incentives for homeowners to buy, the greater their incentive to find a home that meets their needs.”
Home improvement grants may actually be a key factor in the affordability of homesThe study found that people with lower income who had been loaned $100,000 or more in home improvement financing were less satisfied with their homes than people who had received loaned only $40,000.
“The loan was more favorable to the home improvement loanees, but the loan was not as favorable to people with low income,” Taylor said.
“This suggests that the larger the income, the less people with higher incomes are likely to be satisfied with the home improvements.”
The researchers found that low income households that had received home improvements had higher incomes and were more likely to have paid off their loans by the end of their lifetimes.
In other words, the higher the loan, the better the home that was purchased.
But when the home improved to $50,000, the people with the higher incomes were more unhappy with the purchase.
“We think that the higher interest rate that homeowners are receiving on their home improvement programs may make it less likely that they’ll actually make the purchase,” Taylor told Fox News.
The researchers said that people who were loaned a higher interest loan rate might have been less willing to pay for a home improvement project that was not really needed.
The study also found that the more money the loaners were making, the more likely they were to buy less expensive homes.
That means that people earning less than $50 to $75,000 per year might be better off purchasing a home with a lower interest rate than people making more than $100 million per year.