Borrowing more to renovate your home
September 30 2016
What you'll learn
- Different ways to borrow for renovations
- Mortgage refinancing: Is it right for you?
- How to finance major renovations when you buy a house
- Steps to getting a mortgage to finance your renovations
Let’s be honest: it often takes more than vacuuming and Windex to make the bathroom in a new home shine. But that shouldn’t stop you from buying the house of your dreams: several options are available to finance your renovations. Here is an overview.
How to borrow in order to renovate
Several options are available to you when the time comes to buying a house for DIY enthusiasts or because you’re fed up with the flamingo-pink cabinets (with the ornate golden handles!) in your current kitchen:
- Save up the necessary funds and renovate afterwards: the perfect option for patient people and non-urgent renovations.
- Credit cards: Ideal for minor renovations. However, at 20% interest each year with certain cards, the final costs of your renovations may go through the roof.
- Personal loan: Normally, personal loans have lower interest rates than credit cards; you can reimburse your renovations with fixed monthly payments over a short period of time.
- Personal line of credit: This is a popular solution when people start renovating. The interest rates are usually advantageous and the access to funds and reimbursement options are fast and flexible.
- Refinancing your house: For major renovations and loans, refinancing your home is an excellent choice. You can reimburse your loan over a longer period of time and the interest rates are often better than a personal loan. You can borrow up to 80% of your house (not including what is left to be paid on your actual mortgage). Keep in mind that you’ll have to pay notary fees to update your paperwork.
- Financing renovations when you purchase a new home: With a minimal downpayment of 5%, you can borrow up to 95% of the value of your renovated home. It can be a money-saving solution to add your renovations to the overall budget for your new home.
Mortgage financing: The key to getting your renovations done
If you think that a mortgage is the best route to financing your renovations, start by calculating what you need. Be realistic! A bathroom without a sink is not very practical…
Next, talk to your mortgage broker, who will find the best interest rate and mortgage conditions based on your current situation. If you are buying a new home, the offer must be first accepted by the seller. Then, your mortgage broker will take care of presenting your complete project to financial institutions.
Once you are accepted, the best is yet to come! You’ll get quick access to the funds and your renos can start! If you are renovating after the purchase of a home, the lender may withhold some of the money until the end of the renos to make sure that you carry them out according to plan. Your notary or lawyer will be in charge of releasing the funds. Then, you can pay your contractor and other professionals.
Before getting a loan for renovations
So you’ve decided to change the kitchen counters for Corian and ditch the marquetry flooring in the living room? Before you do anything, contact a Multi-Prêts mortgage broker, who will answer all of your questions.
- Several options are available to get financing for your renovations.
- A mortgage is often the ideal means to finance major renovations.
- A mortgage broker can guide you through each step of the process to get financing or refinance your mortgage.