5 Ways to Finance Your Home Renovations
A well-planned home renovation can greatly improve the look and feel of your home and can be a strategic way to increase the value of your property. But, before you start tearing down walls and ripping out floorboards, you should take into consideration these 5 financing options that may help you cover the costs of your home remodelling project.
Grant and rebate options for energy efficiency:
If your home renovations increase the energy efficiency of your property, then you may be eligible to receive a mortgage premium refund of up to 25%. Federal, provincial and municipal governments have set-up grants and rebates to promote the concept of energy efficient homes across the country. To better understand this financing option, consult the CMHC Green Home program.
Mortgage refinancing:
Refinancing your mortgage can be a great way to tap into your equity when looking to complete major home renovations. However, this option is only appropriate if you have already accumulated enough equity on your home and if your credit score is favorable.
Home equity line of credit (HELOC):
A home equity line of credit (HELOC) is a loan that can give you access to 80% of the equity in your home which is calculated by deducting your current mortgage liability from the market value of the property. Nonetheless, because the HELOC is secured by your home's equity, they are subject to set-up costs. This option is usually for bigger projects that cost over $20,000.
Personal loan:
Home renovations that cost between $10,000 to $20,000 can be financed through a personal loan which typically has a lower interest rate than a credit card and is a cost-effective way to get financing as opposed to drawing cash advances. A personal loan can be repaid in regular payments over a set period of time (usually 1 to 5 years).
Savings and DIY:
If you have construction expertise, the most cost-friendly way to go about your remodeling project is to do it yourself and save-up on labor charges. Instead of hiring a contractor to bring in their personal team, you can tackle the job on your own, or with the help of friends and family members.Deciding on which financing option would be right for you depends on the size of your project as well as your particular budget. You should also be aware of your home value before and after your renovations as this will play a huge role in your lender's decision. Nonetheless, it's always helpful to consult a financial planner or professional to look through your options and determine which one is best for your custom home renovations.