Are you living with a circa 1980s-style bathroom, carpet on the floor, cracked tiles, a leaky shower or an old bathtub? Or would you love to upgrade your kitchen or add a new deck to enjoy our beautiful Okanagan summers? How about completing your basement to add a mortgage helper suite?
A recent report determined that 44% of Canadian homeowners have either already completed home renovations in the past year or they’re planning to renovate in the near future.
Perhaps this seems like a daunting proposition as you aren’t sure how you might afford to make these much needed changes, but there are options available.
There are several possible ways that you might finance your home renovations.
• Use your savings
• Use a credit card or an unsecured line of credit
• Home equity line of credit (HELOC)
• A personal loan
• A loan from a family member
These are quick solutions and may work best depending on how extensive and costly your renovations might be or you could perhaps consider a lower cost of borrowing to complete those renovations by obtaining a renovation loan.
Some of the benefits of this type of financing are:
• Lower interest rates
• Lower monthly payments as the loan gets amortized over a longer period
• Access to a higher amount depending on your home equity
• A good option for borrowers who might feel tempted to abuse the flexibility of other home renovation options mentioned above, such as credit lines or credit cards.
You may be tempted to use a line of credit but that may not necessarily be the smartest way to go.
To quote David Chilton, the Wealthy Barber,: “People cannot resist lines of credit.”
“And the worst combination in the country is a line of credit and a home renovation – once they renovate one room, the other rooms pale by comparison, so they go on to the next room and it’s a never-ending cycle of renovation as they get deeper and deeper and deeper in debt,” he added in a speech at a conference of the Canadian Pension and Benefits Institute in May 2011.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.