Last month, we brought you news about a home renovation poll that estimated Canadians plan on spending up to $17,000 renovating their homes to include bathroom and kitchen renovations, outdoor landscaping and general repairs. But having your dream home comes with a price tag. We’re here to tell you: you can have your dream home without emptying your savings to do it. There are many good reasons for homeowners to undertake renovations:
- save on energy bills by purchasing energy-efficient appliances;
- make room for a growing family;
- increase property value;
- make your home livable for your lifestyle.
If you’re holding off on transforming your home due to finances, it’s important to know that you have plenty of financing options available to you. Strike a balance between being financially responsible and improving your home by choosing the best option for you.
Be realistic about your plans
Whether you have the cash flow to fun your own home renovation, or plan to borrow money, that doesn’t mean you want to stretch yourself thin and spent money you reasonably cannot afford. In order to prevent this, sit down with a financial advisor. They’ll help you decide the best route to take from a financial perspective and advise if you can pre-approve for a loan.
Use your own resources when possible
If you’re a handy DIYer and plan to do most of the labour when it comes to small renovation projects, such as buying tile from a retailer and installing it yourself, you may want to avoid taking out a loan and self-fund the material costs. This will save you the hassle of organizing a loan from a bank and paying off interest in the long-run, especially if it’s a small project.
Take out a personal loan
A personal loan gives you the opportunity to pay regular payments of principal and interest for a set period, usually between one and five years, including choosing a fixed or variable interest rate for the term of the loan.
Fixed rate: The rate is set when you take out the loan and will not change for the duration of it.
Variable rate: The variable rate fluctuates over time, so there’s no way to tell how much you’ll be spending on interest during a fixed period. However, the benefit to this is if the rate goes down, your interest payments fall as well.
Use a line of credit
Undertaking major renovations are costly and can be considered long-term depending on the scope of work. A line of credit is ideal for big renovation projects. It lets you access funds at any time. Plus, a line of credit has a lower interest rate than credit cards.
Apply for a HELOC
A Home Equity Line of Credit (HELOC) is extended to a homeowner that puts up their home as collateral. Once a loan balance is established, the homeowner may draw on the line of credit and interest is charged at a variable rate.
In order to pay off the loan, the homeowner may choose a repayment schedule as long as minimum interest payments are paid on a monthly basis.
The benefit to a HELOC is it’s a long-term loan, which means homeowners can conduct major home renovations over an extended period of time and pay off the balance in full without having added stress of paying it off in a short period of time.
This option slightly differs from a line of credit because it offers low interest rates.
Now that you’re armed with all the tools and information you need to finance your next home renovation, so what are you waiting for?
Content courtesy of http://www.eieihome.com
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