Can Renovation Costs be added to a Mortgage?

Renovating your home can be an exciting prospect, whether you’re a first-time home buyer, or a seasoned homeowner.

Renovations can enhance your home’s layout, update spaces, and even add value to your property.

However, financing large-scale renovations can be a challenge if you don’t have the cash on hand.

Here’s how you can incorporate renovation costs into your mortgage, whether you’re buying a new home or already own one.

Considerations Before You Renovate

Before diving into renovations, it’s crucial to evaluate your ability to repay the additional debt. Adding renovation costs to your mortgage increases your financial commitment. Use a detailed budget to plan your expenses and discuss your plans with family, potential contractors, and us!

If your budget can’t accommodate the renovation, you might need to save more, reconsider the scope of your project, or keep searching for a home that meets more of your needs.

Renovations on a New Home

If you’ve found a fixer-upper with potential and want to renovate it to match your vision, you can include renovation costs in your mortgage. It’s best to consult with our team for detailed advice, but here’s an overview of your options.

Options for New Home Buyers

Once you’ve decided to proceed, you have several financing options to consider:

Personal Savings: If you have enough savings, this can be the simplest way to fund smaller renovations without incurring additional debt.

Credit Card: Suitable for minor renovations, but be mindful of high interest rates.

Personal Line of Credit: Provides access to funds for ongoing projects, with interest charged only on the amount used. Interest rates are typically lower than credit cards.

Mortgage Financing: Adding renovation costs to your mortgage usually offers lower interest rates than other financing methods, and you can repay over a longer period.

Discuss these options with our team to determine the best approach for your situation.

Already Own a Home?

If you’re an existing homeowner planning to renovate, you have additional financing tools available. Besides the options mentioned for new buyers, here are some specific to current homeowners:

Mortgage Refinancing

Refinancing your mortgage can provide funds for renovations at lower interest rates compared to personal loans or credit lines. This involves borrowing up to 80% of your home’s appraised value, which might result in higher monthly payments but could offer better long-term savings by modifying your mortgage terms. Consult with your mortgage broker to explore if refinancing suits your needs.

Home Equity Line of Credit (HELOC)

A HELOC allows you to borrow against the equity you’ve built in your home, offering a low-interest financing option for renovations. Typically, you can finance up to 80% of your home’s appraised value and borrow 65% through a HELOC. This flexible and cost-effective solution can make your renovation goals achievable. To read more about HELOCS – visit the link below to read about it in our recent blog post. https://canadianmortgagepro.com/unlock-the-potential-of-your-home-with-a-heloc/

Grants & Rebates for Energy Efficiency

If your renovations aim to improve energy efficiency, you might qualify for grants and rebates from federal, provincial, or municipal governments, as well as local utility companies. These incentives can help offset renovation costs.

Set Aside a Rainy-Day Fund

Regardless of how you finance your renovations, it’s wise to have an emergency fund for unexpected expenses. This fund can cover unforeseen costs or allow for the purchase of new appliances and furniture for your renovated space.

Ready to Start Your Renovation Journey?

Discuss your renovation plans with a member of our team! We’ll help you explore financing options and find the best solutions to make your renovation dreams a reality.