With home values and interest rates being unpredictable this past year, many people are deciding to hold off on selling or purchasing a home until they are more confident in the market. The good news is that it can be a great opportunity to renovate – either to enhance future resale values, or simply to make you truly enjoy your home so that it (finally!) suits your needs. Here’s a handy rundown on some key tips for planning your big reno so that you’re not in over your head when it’s time to get started.
Improving your home’s value
Most renovations, especially when done within a year or two before selling a home, can help increase its market value. Kitchens, bathrooms and basements are the top areas to renovate that help yield the most ‘bang for the buck’ at sale time. Although some people are attracted to the latest and greatest home décor or remodelling trends, it’s important to do the research to determine if, in fact, those trendy upgrades will still be in demand when it’s time to sell. When in doubt, stick to more classic style renovations. Other upgrades such as a new roof, furnace/air conditioner, or hardwood flooring are always popular, and will help with your home sale success when the time comes.
Making your house a home
Your home should be your oasis, so instead of living another year with a space that doesn’t meet your needs, go ahead and renovate! What matters most is that you enjoy your home and that it works for you. If that means a bigger kitchen, main floor laundry, an in-law suite, or a rec room for the kids, then it’s important to make it happen – if finances allow.
What is home equity?
Although renovations are usually a good investment, they do require a fair bit of commitment and financing. If cash-flow is tight or you don’t want to access your savings, you can pay for the renovations by making use of the equity in your home. Equity is the difference between what you have left to pay on your mortgage and the (formally assessed) value of your home. Since most home values increase over time, and mortgage amounts get slowly paid down, it usually means there is equity in that home that can be accessed.
How home equity works
To finance a large project such as a renovation, you can use an equity take out, which a lender will determine using a formula that’s based on your home’s value and what you’ve paid to date on the total mortgage (If your home is fully paid for, you can still use your equity and refinance the home). Once you’ve accessed the equity and received the needed funds, the principal amount you owe on your mortgage will go up by however much you ‘took out’. You can also look into a home equity line of credit (HELOC) to finance the remodelling project, which is outlined here.
Getting a home equity take-out or HELOC is a big decision, which can impact your overall finances for many years. That’s why it’s important to get all the information, weigh the pros and cons, and plan your renovation or remodelling project carefully. As a reputable, experienced mortgage broker in Barrie, I’m here to help. I work closely with my clients find financial solutions to fit their individual needs, including home equity take-outs. Connect with me today at 705-315-0516 to set up an appointment and let’s get started.