Strategies for financing home renovations
Sometimes financing the renovations for your house, or condo is crucial before you can give your project the green light. Here are some ways to finance your home improvement projects.
Whether you want to update your kitchen, expand your bathroom or refresh your basement, home improvements are costly and you have to plan for them.
Homeowners should consider these strategies and options before applying for a mortgage for a renovation project.
For someone who is about to purchase a property and use renovations in the near future, the most advantageous solution is to buy with the renovations cost in mind. “This strategy involves integrating the cost of renovations into the initial mortgage,”
Get a Mortgage with Purchase plus improvements
To calculate the mortgage, you subtract the amount of the down payment from the sale of the home and then add the estimated renovation costs.
The buyer has two major advantages here: they can amortize their reimbursement over several years by adding the amount to their regular mortgage payments and they can take advantage of interest rates that are generally more favorable than any other type of unsecured mortgage.
People who consider adding renovation costs onto their mortgage must confirm that the work has, in fact, been done. They need to provide their financial institution with invoices detailing the cost of the renovations, purchases or submitting a post-renovation inspection report—prerequisites for getting the renovation mortgage in the first place.
Using the line of credit
Another flexible solution is to secure a personal line of credit. This is an interesting option. Another good thing about a line of credit—once it’s authorized—is that you don’t have to produce any proof of the renovations that you’ve done. What’s more, when you renew your mortgage, you can refinance the amount owing on your line of credit if the value of your property is high enough. Sometimes personal mortgage can be an option to know more about that you can discuss with an advisor to see what the best option for you is.
There are several provincial and municipal programs that subsidize various types of renovation projects, including those that are green or energy-efficient. When you apply, make sure that these programs are still in effect and that your project meets the eligibility criteria.
If you have a rewards credit card and you pay the amount back quickly, there may even be advantages to using your credit card in certain situations. For those who have trouble paying their outst0anding balance in full personal line of credit would be a better option because the interest rate is lower
Plan everything smart
While you’re applying for the mortgage, make sure that you apply for the necessary permits. Budget everything in advanced and do not fall foe an expensive materials that you cannot afford.
If you’re handy, take on some of the work yourself to keep costs down, that way you will reduce the financing for the labour cost.
Get the time to get quotes from different contractors. See their works and compare them. Ask as many questions as possible. When they make a great job done that could be the best investment that you make all year. Just remember that you can transfer your renovation into an investment, it is important to make decisions based on your personal budget and taste, all of the work that you do adds value to your property.
Enjoy without stress
So the next time you walk into a home that needs work, don’t get scared off right away if you don’t have the funds readily available to renovate. Whether you use renovation mortgage financing or borrow against an existing mortgage, your dream home may be more achievable than you think.
Your financial worries out of the way at the outset by opting for the best financing solution for you, and you’ll be good to go.
Reference: National Bank