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Home improvements that won't break the bank

Home improvements that won't break the bank

By, Carla Hindman, Director of Financial Education, Visa Canada

If you're a homeowner, it doesn't take long to discover that renovations are not just a great way to protect and increase your investment, they also enable you to keep pace with the priorities of family, career and long term financial planning. Whether it's making room for a new arrival in the family, creating a home office or increasing your home's energy efficiency, there are many motivations for picking up a power tool or hiring a contractor.

A CIBC survey shows that on average, Canadians plan to spend $13,000 on renovations and 62 per cent of people plan on renovating without a budget. If you have ever done a home renovation, even a small one, you'll know that unforeseen issues can drive up the cost. That's why budgeting for home improvements can be tricky. As a suggested rule of thumb, estimate the overall project cost – then add 20 per cent as a cushion.

The good news is that home improvements (assuming they're done well) increase the value of your investment. The most high-return jobs to focus on are typically kitchen and bathroom, followed by painting. Renovating your basement is a great way to increase the livable space of your property or to add an income-generating apartment. Basics like your roof and furnace also tend to yield strong returns.

If you don't have a budget set aside for renovations, you may need to borrow a substantial sum of money. Two of the best options for borrowing large amounts are home equity loans, or home equity lines of credit. Home equity is the difference between what your home is worth, and how much you owe on the mortgage. The advantage of a home equity line of credit is that you only pay interest on the amount you've borrowed – so it's a better option for projects that stretch over several months.

Here are some additional tips and considerations to make your renos go as smoothly as possible:

  • If hiring a contractor, check references to ensure past clients are satisfied. Get multiple quotes, and a contract that outlines the scope of the job, plus the time estimated to complete it. Investing in a professional cost estimate will give you a realistic expectation of scope, and help you budget accurately.
  • Once you decide on a contractor, be sure to put the terms of the renovation (timing, scope of work, warranties) in writing, with a signed agreement between the parties.
  • Paying an architect to draw-up proper plans is an initial expense that can save you money in the long run – and can potentially lead to better results.
  • When it comes to painting, consider priming first. Priming not only makes your paint job look better, it makes the job last longer by preventing cracking and peeling and having to re-paint. If you have kids, consider choosing paint with an 'eggshell' finish so you can scrub the walls.
  • Explore options like cabinet resurfacing in the kitchen as an alternative to potentially costly cabinet replacements.
  • Consider replacing old appliances with energy-saving appliances, this can save you money in the long run!
  • If you're planning a large renovation that will require you to move out, be sure to factor in additional expenses such as rent, a moving truck and meals out into your budget. And remember to budget for permits and fees charged by your local city or municipality.

Happy renovating!





This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

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