With the spring housing market predicted to remain sluggish, many would-be home sellers are staying put and loving their current home or condo a little longer. This becomes a great time to get those much-needed renovations done once and for all and truly enjoy your home. Whether you’re tired of your tired, outdated kitchen or bathroom, you need to make room for your growing family, you’d like a ‘granny’ or ‘nanny’ suite, or you need improved accessibility, then a home renovation makes a lot of sense!
Without having to uproot the family and move, a home renovation will make your home fit your needs. Further, most renovations will add to the value of your home, so when it comes time to sell, you may see the rewards of your renovation first-hand by getting a higher selling price than if you hadn’t made those changes. If you’re wondering what the top renovations are that increase your home’s value, you can usually bank on kitchen and bathroom upgrades, hardwood flooring, finished basements and updated roofing, furnaces, windows and appliances. Keep in mind that after two or more years, these renovations start to dwindle in value.
If you’re concerned about how to pay for a home renovation, you can rest assured that you have some great options to help pay for it!
3.Access your home’s equity
I’ve talked often about the advantages of using your home’s equity to finance a wide range of things, and home renovations are no exception. Your “equity” is the value of your property minus the mortgage or loan amounts owed on it. Through a home-equity loan or a home equity line of credit (also called a HELOC) you can access a lot or a little; whatever suits your current budget. Talk to your lender or mortgage broker to find out your best options. Some people also look into a second mortgage or a full home refinance. What’s important is that you understand all your options, the interest rates, fees and so on so that you have no surprises. Home renovations can be stressful enough, you don’t need added financial woes to contend with.
2. Take out a personal loan or line of credit
Depending on the nature and extent of your home renovation, you may want to take out a personal loan or take advantage of a line of credit. As with any loan, be sure to shop around for the best rates, terms and repayment options.
1.DIY – The old-fashioned way
If you’ve been scrimping, saving and investing over the years, then you may have enough of your own money to get those renovations done without taking out a loan. Just be sure that if you are using a credit card during those (100 or so!) trips to the hardware store, you pay it off in full each month, otherwise you may end up spending a small fortune just on interest.
Another option is to use your tax-free savings account (TFSA) towards your renovation if you feel that’s the best route. However, if you’re considering using your RRSP or other locked-in investment money, then you will have to pay penalties, fees and/or taxes which, in most cases, just wouldn’t be worth the effort.
Depending on the nature and extent of your home renovation, you may be rewarded with a small financial incentive through the Ontario and Federal governments who offer renovation grants, rebates and tax credits. Be sure to do your research and find out which ones are in effect and what the parameters are. For example, if your home renovation involves eco/energy-saving alterations, or will better accommodate seniors and people with disabilities, you may qualify for a rebate or tax credit to offset the costs.
Preparation is key
If you’ve seen even a few home renovation shows, then you know that you need to prepare for the unexpected, because inevitably something will go awry! Although some experts recommend adding 10% to your budget for unplanned costs and repairs, you can always go a bit higher just to be on the safe side. It’s also important to thoroughly research the tradespeople and contractors who will be working for you and to make sure you get all necessary permits before you begin. I’ve said it before and I’m happy to say it again – your home is your biggest investment, so it’s worth it to make sure it’s exactly what you want.
Finally, before starting that exciting home renovation project, talk to me. As an experienced mortgage broker and a financial advisor, I’ll be able to help you understand your options to finance your renovation, so you don’t get in over your head. Connect with me today at 705-230-1306 to set up your appointment and let’s get building!