The 50% limit is just a rule of thumb. Because most projects are unlikely to recoup more than two-thirds of their costs and some will return less, it's smart to be conservative by saying only half the cost of your project will increase your home's value and thus can be financed.

But if you're going to finance any part of the cost, make sure your improvement really does add value. That means you should:

  • Beware any upgrade that makes your house bigger or fancier than most others in your neighborhood, as such remodels are unlikely to add much value.
  • Be cautious about adding pools or spas, as they repel as many buyers as they attract in most markets (because of the hassle or because of the drowning risk with young children).
  • Aim to please the crowd rather than indulging your personal tastes. Bold statements like brightly colored appliances won't be a hit with many buyers.

What if you can't finance the project you want, either because your credit or your home equity is shot? Then it's time to start saving cash and considering alternatives.

Among the possibilities:

  • Can you refurbish rather than remove? Refinishing or refacing cabinets is usually less expensive than replacing them. Reglazing tubs and sinks can extend their lives and save you thousands compared with a gut remodel.
  • Can you rethink how you use space? Adding square footage may seem like a logical way to deal with a space crunch. But maybe you just need to ditch some clutter or re-purpose a room. Never use your formal dining room? Maybe it could be your office or a guest bedroom instead.
  • What can you do with a little paint? Paint is inexpensive and relatively easy to apply, and can dramatically transform the look of a room.

When a little remodeling pays off

Finally, if you're trying to sell your home, you clearly shouldn't sink money into a major remodel. But there are some low-cost fixes that real-estate agents typically recommend as likely to return far more than they cost. Such as:

  • Lighten and brighten. Wash windows, remove heavy curtains, trim back branches and bushes that cover windows (free to do it yourself, $100 to $300 to hire window washers).
  • Declutter. Pack up at least a third of your belongings and store them ($200 to $300 a month for off-site storage).
  • Deep-clean. Scour your house from top to bottom ($200 to $300 for professionals, basically free if you do it yourself).
  • Spruce up landscaping. Trim bushes and hedges, plant flowers, renew mulch ($300 to $400 for professionals, free if you do it yourself).
  • Staging. Rearrange furniture and décor to highlight positives and downplay negatives (costs can range from free, if you pick up a home-staging book at the library, to $500 and up for professional help).

Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.