4 important questions to ask before renovating your home
“There are many reasons why you might decide to renovate,” says Nicole Giesbrecht, Assistant Consumer Lending Manager at SCU’s Linden Ridge branch. Whether you want to increase your home’s curb appeal, carry out general maintenance, or give your home a personal touch, it takes planning to execute it successfully. Big or small, Giesbrecht says all home renovations start by asking yourself these important questions:
1. How much will my renovation cost?
The best place to begin is by estimating your expenses. Giesbrecht recommends adding up all the expenses so you know how much you’ll need to confidently proceed with the renovation. Talking to at least two contractors and collecting multiple estimates will help you understand the scope and budget of your project. The more information you collect, the better your estimated costs will be. For more information on budgeting for your renovation, you can download our guidebook.
2. Will this renovation bring value?
“Of course, some renovations add more resale value than others,” says Giesbrecht. “But this also depends on how you go about the renovation.” Take a kitchen, for example. Modernizing the appearance, using quality materials, and improving the functionality of the space is a great way to raise the value of your home. In contrast, adding custom, industrial-grade appliances may suit your personal needs, but won’t appeal to everyone. A good point of reference for determining how much your home will be worth is to collect your contractor quotes and have an appraiser approve the upon-completion value of your home.
Another important factor to consider is whether or not you’re putting money into the right home. Does your renovation make financial sense for the length of time you’re living in the home? If this is your “forever home,” adding an addition or larger-scale project makes more sense than if you plan on moving in a few years. Giesbrecht says there’s also a limit for how much resale value you can add to your home, depending on factors like the size of the home, your neighbourhood, and overall market trends.
3. How should I finance my renovation?
“The answer to this question is really customized based on your needs,” Giesbrecht says. Your financing choice will depend on your home equity, the size of the project, and how you want to access your funds. For instance, maybe you want the ability to access your money as you need it. A line of credit may work best for you, as you can get approved once, reuse the funds in the future, and only pay interest on the funds you use. Or, if you’re planning to pay for your project over a number of years, a loan might be the better choice.
Another option Giesbrecht often recommends to members is our renovation mortgage, a specialty product that allows you to spread out the cost of your renovation over the duration of your mortgage. It’s a unique product that helps you borrow at a lower rate, and leverage your home’s current value or the value of your home upon renovation completion.
4. What are extra expenses that might come up?
With any renovation, you should always plan for the unexpected. Many members are surprised by expenses like unknown permits, upgrades made while renovating, or other unbudgeted repairs that need to be done at the same time.
That’s where a contingency fund comes in. It helps you cover the costs when appliances are more expensive than you realized, your budget-friendly countertops don’t work for your newly-renovated kitchen, or you fall in love with flooring that costs double what you planned. “We get it — costs creep up,” says Giesbrecht. “Talk to us early in the process so we can help you make a plan that accommodates those unexpected expenses.”
Want to learn more about financing your renovation? Watch our renovation video for more helpful information, and contact a lending specialist.