We all love a good ol’ home renovation show or a DIY project we come across. But when you’re serious about renovating your home, there are many things to think about. Will the decor choices I make stay in style? Will renovations help your home sell in the future? Can you afford it? Renovations to your home can potentially offset falling home prices and values, but it really depends on quite a few factors.
What kind of renovations increases the value of my home?
- Kitchen renovations: Updating an outdated kitchen can be a big selling point for potential buyers. Some popular kitchen renovation projects include replacing countertops, updating cabinets, and installing new appliances.
- Bathroom renovations: Similar to kitchens, updating a bathroom can also add value to your home. You might look at replacing outdated fixtures, adding new lighting, and updating the flooring.
- Adding square footage: Adding livable square footage to your home, such as finishing a basement or adding a room, can potentially increase its value. However, it’s important to keep in mind that adding square footage can be expensive, so it’s important to do your research and make sure the cost of the renovation is justified by the potential increase in value.
- Exterior renovations: The exterior of your home is the first thing potential buyers see, so updating it can be a great way to increase curb appeal and potentially increase the value of your home. A few exterior renovation projects you could look at would be adding new siding, updating landscaping, and installing a new front door.
- Energy-efficient upgrades: Making energy-efficient upgrades to your home can be a great selling point for potential buyers and could include upgrades like installing new windows, adding insulation, and updating heating and cooling systems.
What types of renovations won’t add value to your home?
Not all renovations are created equal in terms of their potential impact on your home’s value. Some renovations may not recoup their cost and could even lower your home’s value. To help you avoid them this is a quick list to take a look at in terms of what NOT to do.
- Over-Personalized Décor: Adding unique or very specific decor, such as bold colours or themed rooms, can make your home less appealing to potential buyers who may not share your taste. A good rule of thumb is to stick with neutral and timeless decor that will appeal to a wide range of buyers if you’re renovating for the sole purpose of selling.
- Removing Bedrooms: Combining two smaller bedrooms into one large bedroom, or removing a bedroom altogether, can decrease the value of your home. Buyers typically want homes with enough bedrooms to accommodate their families and guests, so reducing the number of bedrooms can be a major turn-off.
- DIY Projects: While DIY projects can be a great way to save money on renovations, they can also be a turn-off to potential buyers if they are not done properly or look unprofessional. Poor quality workmanship or odd design choices can detract from the appeal of your home.
- Removing Key Features: Taking away things such as a fireplace, bathtub, or kitchen island can decrease the value of your home. These features are often what set your home apart from others in the area, so removing them could make your home less desirable to potential buyers.
- Adding Too Much Personality: Making your house your home is one thing but, when you add too much personality to your home it can be a turn-off to buyers. This includes things like murals, themed rooms, excessive artwork, strange built-ins, or an overabundance of family photos even. While it’s important to make your home feel personal and welcoming, it’s also important to keep it neutral enough that potential buyers can envision themselves living there.
- Renovations that require too much work for the new homeowners to upkeep: A prime example is installing a swimming pool. Many homeowners take the pool out before selling their home, but it depends on the style of home you have. If it’s a fantastic family home, then maybe a swimming pool is good for sale. Always talk to your real estate agent about what you should do before listing your home and speak with your financial advisor or mortgage broker to get a solid idea of how your home value might increase or decrease along with how to best fund your renovations.
In general, it’s important to be careful with any renovations that involve major changes to the layout or features of your home. Always consider how your renovations will affect the overall value and appeal of your home before making any major changes or maybe even minor ones as every renovation has an impact on your pocketbook.
Does the real estate market affect how many or which renovations you should or shouldn’t do on your home?
The state of the local real estate market is also an important factor to consider before breaking out the hammer. In a hot market where prices are rising, renovations may not be as necessary to maintain the value of your home. However, in a slow market where prices are falling, renovations can be a way to differentiate your home from other properties on the market and maintain or increase its value.
How much will the renovations cost in relation to your home value gain?
If the renovation is too expensive, it may not recoup its cost, and you may not see a positive return on your investment. However, if the renovation is reasonably priced and adds significant value to your home, it could offset falling values.
How to pay for your home renovations:
There are several ways to pay for home renovations in Canada. These are a few common options I often see clients take advantage of:
- A HELOC or Home Equity Line of Credit is a revolving line of credit that is secured against the equity in your home. This can be a good option for large renovation projects because the interest rates are typically lower than other forms of credit.
- A home equity loan is a lump sum loan that is secured against the equity in your home. It is similar to a HELOC, but you receive the entire loan amount upfront and make fixed payments over a set term.
- Refinancing your mortgage can provide a lump sum of cash that can be used for home renovations. However, this option should be carefully considered because it can increase your mortgage payments and overall debt.
- There are several government programs available to help finance home renovations, such as the Canada Mortgage and Housing Corporation’s Home Renovation Financing options.
- Using your Tax-Free Savings Account (TFSA) to fund your renovations can be a good option, especially if you have built up a significant amount of savings in your TFSA.
- Call a financial advisor, like myself, Darren Robinson, to discuss which options are best for you! We have options the banks don’t.
It’s important to carefully consider your options when it comes to renovating a home whether you’re thinking of selling right now or not. Your mortgage and current home equity can be used as a financial tool to help you increase the value of your home while saving on interest long-term but, we need to compare interest rates, fees, and repayment terms before making a final decision. As a financial advisor and experienced mortgage broker, I can help you navigate the options available to you to ensure you’re making the best decisions for you and your family specifically. I’m only a phone call away at 705-315-0516, or you can click here to sign up for a free consultation when you’re ready to take the next step.