Plan and budget your home renovations in 5 simple steps
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Home renovations are very much akin to all-you-can-eat buffets.
The intention is always to begin with only as much as you can handle. But with so many delectable options, it’s easy to bite off way more than you can chew—especially financially.
That’s where planning and budgeting comes in.
Whether you’re adding a simple built-in or conducting a full-blown kitchen or bathroom re-do, setting certain parameters (I.e. creating a plan and budget) will keep your renos in check, every step of the way.
Successfully plan and budget your home renovations by using these 5 simple steps:
1: Prioritize projects.
While it can be tempting to do everything, unless you have a limitless budget for your renovations it’s better to stick to the ‘must-haves’, first. This would be anything in your home that is in dire need of updating (yes, we mean you leaky faucets). You can also prioritize projects based on what will bring the most value. According to real estate agents, home renovations that generate the highest return on investment are kitchens, bathrooms, interior/exterior painting, and updating décor.
2: Consider cost factors.
Home renovations also come with so many variables that can influence how much you spend. If you own an older home, certain renos could potentially uncover costly surprises (I.e. lead pipes, asbestos, knob-and-tube wiring, etc.). Then there are things such as the size of the space, the complexity of the project (I.e. will walls have to come down or plumbing need to be moved/added), and most importantly—whether you plan to do everything yourself or hire a contractor. If you plan do the latter, just be sure that person is a certified/qualified professional. Because fixing any mistakes will end up costing you way more in the long run.
3: Get your financing in place.
Once you’ve considered all of the cost factors, you’ll need to ensure you have the funds to pay for those home renovations. Ideally, this will be done through a ‘reno fund’ you’ve been saving towards. However, the way life happens these days, that’s not always possible. If you end up needing to supplement the cost of your renos, consider borrowing options such as a line of credit. It’s a lot cheaper than using high-interest credit cards and payments also tend to be way more flexible. Just be sure to exercise caution with how much credit you use, as you will have to pay it off eventually.
4: Look into government grants and rebates.
When renovating, many Canadians miss out on any grants, loans, and rebates available to them for energy efficient upgrades. This is where doing your research beforehand can really pay off when it comes to bringing down (or helping with) the cost of your reno. For example, Toronto homeowners can get a low-interest loan of up to $75K to cover the cost of home energy improvements through the Home Energy Loan Program. You can also search by province to see what financial incentives or programs are available for your area.
5: Remember the ‘1% rule’.
While not all home renovation projects are created equal, there is a general rule of thumb everyone can follow to successfully manage costs. This rule recommends budgeting at least 1% of your home’s value each year for ongoing maintenance and improvement. This means if your property is worth $500,000, you should be setting aside $5,000 annually (preferably into an investment, such as a TFSA, that will generate a return and be easy to access when you need it).
Another benefit to working home renovations into your budget isthat it affords you to plan for any surprises.
Because if you’ve ever watched any type of home renovation show, you’ll know that surprises (the not-so-good and expensive kind) are pretty much inevitable. Building a 1% financial buffer into your budget will ensure that you will be able to accommodate whatever expenses, home improvement and otherwise, that may arise.
Ready to make your home renovations a reality? We can help you come up with a financial plan.
Educators Financial Group has been helping education members to realize their home reno dreams since the 1970s (the era of shag carpeting). We can provide you with the right saving or borrowing solutions to suit your specific home renovation needs, goals, and budget—no matter where you are on the pay grid or what your income is in retirement.
Have one of our mortgage agents contact you.
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