Home renovation shows seem to have become an overnight sensation. More and more people are watching these do-it-yourself programs and are opting to invest money into their own homes.

Whether you simply want to finish your basement or add to your kitchen, you are among the many Canadians who have caught the home renovation bug. Others have also joined the home renovation trend, but are doing so for investment purposes. These people tend to purchase older properties with the sole intention of renovating and flipping the property for a quick profit.

But despite the reasons for renovating, most homeowners have one thing in common. They all need to find a way to finance their projects. In the past, many homeowners have used their high-interest credit cards and credit lines or even taken out second mortgages to pay for their home renovations, but this can become quite costly.

That is why at SaskEquity Mortgages, we offer our clients a better way to raise funds for their home renovation projects. By using the valuable equity in your home and refinancing your existing mortgage, you can free up the money needed to get your job done.

How to Finance a Renovation

Although kitchen and bathroom redos are smart renovations – the potential return on investment is between 75 and 100 percent – it may not be easy to secure the funds for planned projects.

Thankfully, there are several options homeowners may consider before hiring a contractor and drawing up the blueprints. It’s always wise to discuss potential options with financial experts and local mortgage pros, who will be able to help you determine if the investment is worthwhile and what the ROI may be.

Credit Card

Qualifying for a credit card may be easier than getting a loan from a bank, but it can also be riskier. Credit card interest rates tend to be high, meaning that if you use your credit card for large renovation projects and don’t pay your balance in full each month, the amount you owe can skyrocket quickly. Also, keep in mind that keeping the balance for too long can harm your credit score. If you do plan on using a credit card to pay for home renovations, use it sparingly and only for smaller projects. Also, try to find a credit card with low interest rates and generous repayment terms.

Personal Loans

If you qualify for a personal loan, there’s a good chance that your interest rate will be lower than if you used a credit card. In addition, you will have the option to choose a fixed or variable interest rate. However, it’s important to make sure you can stay up to date with payments that will likely span several years. Also keep in mind that, unlike credit, a personal loan is a one-time lump sum. This means that once the loan is paid off, you have to reapply to access more funds.

Home Equity Loan

As its name implies, a home equity loan allows you to access your property’s equity in the form of cash. The interest rates are very favourable on home equity loans, making them more economical than a regular personal loan. However, it’s important to remember that a home equity loan uses your property as a guarantee, meaning that failure to repay your home equity loan could result in losing your home. In addition, there are usually legal and appraisal fees applied to a home equity loan.

Home Equity Line of Credit (HELOC)

A home equity line of credit is very similar to a home equity loan, but instead of receiving one lump sum payment a home equity line of credit allows homeowners to go back and access their home’s equity whenever they need it. A home equity loan can offer more freedom and flexibility than a home equity loan, letting you borrow as you go. However, the risk of losing your home if you fail to repay remains.

Grants

Depending on what type of renovations you’re making it may be possible to receive funding from the government and utility companies. Making your home more energy-efficient could make you eligible for grants of up to $5,000, in addition to special rebates. Even better, these types of renovations will also help you save money on energy costs for your home, resulting in even more savings.

Mortgage Refinancing

Refinancing your mortgage can allow you to borrow up to 80 percent of your home’s appraised value, letting you repay the loan over an extended period of time. Not only will this help you lower your monthly payments, but if you do this at a time when rates are significantly lower, the savings can add up fast. However, mortgage refinancing will come with fees attached for legal processes and appraisal. Before you refinance your home loan, make sure the math works. No point in taking this action if you won’t be saving money in the long run. 

Renovation Projects to Avoid

Without further ado, here’s what Canadian Realtors call the worst renovation decisions for home resale value:

• All carpet and no hardwood flooring, which many people consider outdated and difficult to clean.
• Home theatres and fancy-schmancy surround sound systems, both of which attract a specific buyer and may limit interested parties.
• Out-of-the-ordinary bathroom fixtures, which potential buyers will quickly consider an added expense they will have to pay to remove.
• Wild wallpaper and brightly painted walls, especially when selling to attract established buyers who may not be able to see past the existing colour scheme.

When in doubt, seek expert opinions
One major benefit homeowners may enjoy that renters may not is that the former is free to decorate and do whatever they please – while minding local regulations and associations, of course. Want to have a mosaic mermaid on the bathroom wall? How about a permanent hot tub fixture in the living room instead of traditional seating? Go for it. Be free and renovate as you wish!

However, first-time and repeat buyers who are having a difficult time finding houses that fit their specific vision or are considering a renovation in hopes of maintaining home value are encouraged to get professionals’ opinions before swinging a sledgehammer

SaskEquity is Here for Your Renovation Needs

A home renovation or home equity loan from SaskEquity can replace or be added to a home owner’s first mortgage. With mortgage finance rates at an all-time low, it is the perfect time to consider refinancing because you will likely get a lower rate than you are currently paying at your bank. By getting a lower rate on your mortgage, you will save money on your overall mortgage payments and over time, the cost of your renovation may even balance out with what you saved.

Homeowners still have the option to use their credit cards and credit lines, or even take out a second mortgage to finance their home renovation projects, but at SaskEquity, we recommend refinancing as our client’s best option. We are dedicated to finding our clients the best mortgage rates in Canada because we understand how important your dreams are as a homeowner. Simply fill out our easy and convenient online application form and start enjoying your newly renovated home today instead of worrying about how to pay for it.