Before embarking on the work, discover solutions to finance the renovations of your home, condo, or chalet, and tips that will allow you to be well prepared.
Whether you want to update your kitchen, expand your bathroom, or remodel your basement, renovations generate high costs that must be well planned.
“Louis-François Ethier, Product Director of the National Bank, Hypothec Credit Solutions, addresses the best strategies to pursue when applying for a loan for a renovation project:” For homeowners, two main options should be considered, namely mortgage financing. and the personal line of credit. “
1 Mortgage Loan: Purchase With Renovation
For someone who is about to acquire a property and who plans to renovate it shortly, the most practical solution is the purchase with a renovation formula. Louis-François Ethier says, “This approach consists of incorporating the cost of renovations into the initial mortgage loan.”
The expert mentions the example of a person coveting a $ 200,000 house: “If they make a down payment of $ 20,000 and want to spend around $ 30,000 to renovate the kitchen and bathroom, they can take out a mortgage loan of $ 210,000. To calculate this loan, you have to subtract the amount of the down payment from the sale price, then add the anticipated renovation cost.
This strategy has two significant advantages: the ability to amortize the repayment of renovations over several years by merging the sum into regular mortgage payments and to take advantage of interest rates generally more favorable than any other form of unsecured loan.
Emphasizes that people using the purchase with renovation must confirm the completion of the work by sending their institution the receipts justifying the cost of the work carried out and the investments made, or the post-inspection report: position, prerequisites to receive the loan amount used for renovations.
2 Personal Line Of Credit
The other recommended option, especially for lighter jobs, is using a personal line of credit. “It’s an excellent formula, analyzes. This solution is very flexible, as the funds can be used at your convenience and only interest in the amount used is payable. “
The use of a line of credit, once authorized, is all the more relevant since no proof of all the work is required. Also, at the time of mortgage renewal, the balance owing on the margin can be transferred to that refinance if the value of the property is sufficient.
In addition to the two solutions listed above and recommended by the expert, other means can allow you to increase your cash flow to defray the costs of your renovation projects. The personal loan can also be an option; speak with an advisor to determine the best alternative for your situation.
As condo owners do by withdrawing an amount for the contingency fund each month, suggests favoring periodic savings: excellent financial habits. Nobody wants to interrupt renovations to a kitchen in the middle of the construction site for lack of funds. “
This is all the more practical when the time comes to start the inevitable maintenance work without any real aesthetic value, such as redoing the roof, replacing windows, or making a chimney comply with environmental standards.
Several provincial or municipal assistance programs are offered to support various types of renovation projects, including those of an environmental or energy-efficient nature. When applying, make sure that these programs are still in effect and that your project meets the eligibility criteria.
Due to its interest rates, the credit card is only recommended as a last resort, for example, to deal with certain unforeseen events or to carry out minor works. Points cardholders who feel able to repay the sums quickly might find some advantages.
One thing is sure, for people who doubt their ability to pay all sums on the next balance, Louis-François Ethier advises to opt for the personal line of credit, the right choice, mostly because of the interest rates.
Plan For The Unexpected
Take advantage of your financing procedures to make sure you have the required permits. Also, plan a fund to counter the unexpected, including attractive materials that will embellish your living spaces.
If you are skilled with a saw, hammer, or brush, participating in the work will certainly help reduce your bill, and therefore reduce the cost of the financing necessary to start your renovations, as your skills will match your expectations. and those of your relatives or future buyers.
Otherwise, take the time to get several quotes from contractors, compare them, get information, and ask them as many questions as possible. This could turn out to be the most profitable investment of your year.To read more, click here.