If your family has grown out of your current home or your house could use a makeover to bring it into the 21st century, stop and think about renovating it instead of shopping for something new. It may be worthwhile to consider using some of your home equity to finance those renovations so you can remain at your current address.
First things first
Ask yourself if your home can be adjusted to meet your needs. Is your lot big enough for an addition? Can your foundation handle the weight of an extra floor? Does the tired look of your home require a major overhaul? Will the renovation add value to the home?
Plan out the changes you would like to make and speak to professional renovators to seek several quotes before making your decision.
Next, depending on the complexity of the project, decide if you and your family will live in a construction zone for several weeks or months while the improvements are being made.
Finally, unless you have a lot of money saved up, decide what makes the most financial sense for you and your family in the long run.
Evaluate your finances
If you have owned your home for a while, now is a good time to think about making renovations. According to a 2021 Canadian Bankers Association statement: “Canadian homeowners have an average home equity of 73 percent of their home’s value.”
Use some of your home equity to put towards renovations. A home equity line of credit, (HELOC), allows you to access money as required for each stage of your renovation, or a construction mortgage may be your best bet. The key is to talk to a mortgage expert who has access to multiple financial institutions and products to ensure you get the most bang for your buck.
It’s also important to evaluate the renovation costs with the potential for your home to increase in value.
Buying a new home means incurring moving costs such as real estate fees (upon selling your existing home), legal fees, property transfer taxes, hiring movers, decorating the new home and a possible mortgage penalty.
Identify the pros and cons
The decision between renovating or upgrading to a new house is also about your time, energy and peace of mind. Each choice has its advantages and disadvantages. Take the time to discuss what you want to do, why you want to do it, what the costs of a renovation would be, and the value of your renovated home in relation to other homes in your neighbourhood and compare it with the costs of buying a new home. This way, you can determine the option that is best for you.