You may be looking to become more energy efficient and save money on your monthly utility bills, expand your family, improve your family’s safety or your home’s resale value, or just give your home a facelift. Whatever your reason for your home renovation, know there are many financial options available to help you finance it.
Before You Start
If you’re considering borrow money to finance your reno, it may be a good idea to speak to a mortgage broker first. You need to fully understand your options in order to know how much you can borrow based on a loan pre-approval. Otherwise your financial plan may not be very realistic.
Exploring All of Your Options
It’s extremely important that you explore every single one of your options before making a sound final decision with your finances for your home renovation. Here are a few options to consider:
- Self-fund your project. If you’re working on a smaller renovation project, then you may have the financial ability to cover your own costs for materials and labour.
- Use credit. Another option for smaller renos if you don’t have cash on hand, is to use your available credit to cover costs. However, since interest rates are usually high, you should also have a payment plan in place if you decide to take this route, otherwise it could result in negative impacts to your credit history.
- Get a personal loan. Bigger renovation project may require a longer period of time in order for you pay it off. If this is the case you can get a personal loan and make monthly payments on the principal amount, plus interest, over a one to five-year term. This is definitely a better route to take than using credit, as interest rates are typically lower.
- Apply for a personal line of credit. When financing an ongoing or long-term renovation, this is probably the best option for you. You’ll have access to the money you need when you need it. You’ll also receive monthly statements, so it’ll be easier to keep track of your spending for better budgeting. The best part is that a line of credit also has a lower interest rate when compared to credit cards. You’re only charged interest on the funds you use on a monthly basis..
- Apply for a home equity loan. With this type of financinh you’ll get all of the same advantages that come with a personal line of credit. The only difference is they’ll be secured by the equity in your home. They are very popular due to the fact they are more economical, as they offer better interest rates. They also enable you to borrow up to 80 percent of your home’s value.
- Refinance your mortgage. If you’re undergoing a major renovation, then refinancing is probably the best option for you. You’re given a longer period to repay with lower interest rates, when compared to both credit and personal loans. Similar to a home equity loan, you can borrow up to 80% of the appraised value of your home
- Finance your renovation at the time of purchase. If you’re buying a fixer-upper then consider the many advantages of financing when you purchase. This will allow you to the estimated costs of your renovation to your mortgage.
Are you considering a home renovation? Speak to a mortgage expert today to explore your options further.