Are you thinking of carrying out renovations in order to enjoy the comfort of your home for a long time to come? Or do you want to sell your house?
Currently, renovated houses are not abundant on the market; by carrying out work, you increase your chances of finding a buyer more quickly while obtaining a better price.
Whatever the reasons for which you want to transform your home, you wonder how to finance the work. Depending on your situation, you have several options.
Renovations and you
Unless there is an emergency where you need to intervene quickly, you should take the time to define your project.
Why do you want to do renovations? To give your home a youthful look? To improve energy performance? Also determine your debt tolerance. Some are allergic to it. This information will allow you to draw up a budget that takes into account the type of borrower you are, as well as your repayment capacity.
Small is beautiful
Many home improvement consultants recommend not doing everything at once.
Thus, the work is carried out according to planned stages, which can be modified along the way, while providing the financing yourself with your personal savings.
Some seek financial support from loved ones or use their home equity line of credit. Borrowing from a financial institution is then not necessary. Simple, phased, planned approach, in which many feel much more comfortable. Not to neglect.
Refinance your mortgage loan
If your budget shows enough leeway to take out a loan, larger renovations are possible.
This possibility will appeal to those who do not want to spread out the renovations. In addition, many take the opportunity to consolidate all of their debts, particularly credit card balances. They add those balances to the amount needed for the renovations and refinance it all at a lower rate than credit cards using the value the home has acquired over the years. Kill two birds with one stone, why not?
Finance by taking out a new mortgage
If you want to buy a house, renovate it and move in, you could ask for a higher mortgage loan in order to have cash to carry out the work.
The advantage of doing so is to reduce the cost of renovations, because you will benefit from the low rate of a mortgage loan.
Net worth and mortgage
Over the years, your home has increased in value. A capital gain, sometimes significant, which you can take advantage of by refinancing your mortgage loan. If you are thinking of carrying out major renovations, you will like this option, especially if you do not want to stagger the work.
Many take advantage of refinancing to consolidate all of their debts, particularly credit card balances. They add these balances to the amount required for the renovations and refinance everything at a lower rate than credit cards. Kill two birds with one stone, why not?
Mortgage financing will also interest those who wish to buy a new house, renovate it and move into it. By requesting a higher mortgage loan, they will have the necessary cash to complete their project, while benefiting from the low rate of a mortgage loan.
Personal line of credit
Obtaining a personal line of credit has the advantage of not having to give your house as collateral. You will only pay interest on the used portion of the margin, which is much more advantageous than a personal loan. Another advantage is that the funds are quickly accessible, without having to make a request to the banker.
In conclusion, you can finance your renovations in various ways. Choose the one that suits you and take action.
TIPS
- Consult the financial advisor at your financial institution to determine your borrowing capacity.
- Provide an emergency fund. Not using up all of your cash.
- Do not use your RRSPs to make renovations, since the amount withdrawn becomes taxable.
- Check with the relevant government authorities for the possibility of benefiting from renovation subsidies or tax credits.