Refinancing for Renovations: Is it a Good Idea?

Refinance For Renovation

With the Canadian housing market being as active as it is, investing in your home seems like a pretty smart idea, but it’s not entirely foolproof. In addition, if you decide to go forward with the remodel, there may be other options better suited to financing the expense.

Renovating to save the house

Certain damage to the home greatly undermines its value and your ability to live in it. The following is just a list of urgent repairs that shouldn’t be ignored:

  • Flooding and burst pipes
  • Fire damage
  • Hole in the roof
  • Structural damage
  • General neglect that’s bad enough to lead to the home being condemned

These are legitimate reasons for emergency repairs, as the health of you and your family is as important as any expense.

Investing to increase the value of your home

If you intend on living in your house for more than another 5-10 years, the renovations that you do to the house now may not be worth as much by the time it’s on the market. For one thing, general wear and tear will make the improvements to the house less ‘new’. Unless you’re making additions to the layout of the house, altering anything related to HVAC, or making the house just a safer place to live, there is a lifespan to how much the renovations will be worth on the market. Also, styles come and go, and this is true for anything that follows trends, meaning your house will eventually look dated.

Finally, some changes will only appeal to a narrow band of homebuyers, so adding a jacuzzi to the master bathroom or a pizza oven to the kitchen may even drive away potential buyers in the future.

Offsetting the expense

There are some federal and provincial programs that encourage certain types of consumer spending, and you may be able to apply for rebates on your expenses. In addition, organizations like the CMHC has a mortgage loan insurance premium refund for energy efficient homes. These types of improvements will lower energy use, so even if the net benefit is still a loss, it’s still not as expensive as a remodel of the kitchen.

Choosing your method of financing

There are alternative options to pay for the purchase, including:

  • Credit cards
  • Personal line of credit
  • Home equity loans

Although, these items often come with high interest rates that should be avoided whenever possible. Ideally, for the non-essential renovations you should try to create goals and a savings plan so that you can afford to finance the renovations yourself.

However it the debt is mounting and you cant figure out your best options for keeping your home and still being able to pay the bills it is important to contact a professional, for more guidance on which option would be best for your financial state, contact our team today.

Speak to an expert today.