Home Renovation

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Home Renovation Financing Options

  There are many  different reasons to renovate a home: to save energy (and save on utility  bills), to make room for a growing family, to improve safety or increase the  resale value of your home, or simply to bring a fresh new look to your home.  There are also a number of different ways to finance your renovation.

Explore  your options

Your own  resources: For smaller renovation projects,  you may consider self-funding material costs, especially if you plan to do the  work yourself.

    Credit  card: Likewise, you can use your credit card  to pay for materials for smaller renovations. But be careful not to carry the  balance for too long. Credit card interest rates can exceed 18%.

Personal  loan: With a personal loan, you pay regular  payments of principal and interest for a set period, typically one to five  years. You also have the option of a fixed or variable interest rate for the  term of the loan. The interest rate on a personal loan is typically less than  that of a credit card. Unlike a line of credit, however, once you pay off your  loan, you’ll have to reapply to borrow any new funds needed.

Personal  line of credit: This is another popular choice  for financing renovations. It’s ideal for ongoing or long-term renovations  since it lets you access your funds at any time and provides a monthly  statement to help track expenses. A line of credit offers lower interest rates  than credit cards, and charges interest only on funds used each month. And, as  you pay off your balance, you can access remaining funds, up to the line of  credit’s limit, without reapplying.

Secured  lines of credit and home equity loans: These  options offer all the advantages of regular lines of credit or loans, but are  secured by your home’s equity. They can be very economical, since they offer  preferred interest rates, but keep in mind that initial set-up costs including  legal and appraisal fees usually apply. Lines of credit are typically limited to  65%, while home equity loans are capped at 80% of your home’s value.

Mortgage  refinancing: When funding major renovations,  refinancing your mortgage lets you spread repayment over a longer period at  mortgage interest rates, which are usually much lower than credit card or  personal loan rates. This type of financing can allow you to borrow up to 80%  of your home’s appraised value (less any outstanding mortgage balance). Initial  set-up costs including legal and appraisal fees may apply.

Financing  improvements upon purchase: If you’re planning  major improvements for a home you’re about to purchase, it may be advantageous  to finance the renovations at the time of purchase by adding their estimated  costs to your mortgage. Canada Mortgage and Housing Corporation (CMHC) Mortgage  Loan Insurance can help you obtain financing for both the purchase of your home  and the renovations – up to 95% of the value after renovations – with a minimum  down payment of 5%.

Grants/rebates for energy-saving renovations

Across Canada,  renovation grants and rebates are available from the federal and provincial  governments and local utilities, especially for energy-saving renovations. If  you qualify, they may help pay for some of your project’s costs.

DID YOU KNOW… There are many ways to significantly reduce or even  eliminate paying credit card fees. Conscientious cardholders can avoid paying most  of these fees altogether when they choose the right cards and use them wisely. As always, if you  have questions about paying your mortgage off quicker, or other  mortgage-related questions, I’m here to help!




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About Sky Financial

We incorporated The Mortgage Centre-Sky Financial Corp. in August 1992 in Edmonton Alberta. Furthermore we opened offices in Fort McMurray, Cold Lake, Grande Prairie, Red Deer, Stettler, Saskatoon, Moose Jaw and Prince George BC.

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