A reader, M.Me Plourde wants to know what financing method would be the most beneficial for renovating his home and backyard. She renews her mortgage at the end of the month and wonders what to do as she doesn’t want to increase the balance of the loan that is nearing the end of the day.
Where to start ?
The first step is to define the project.
Of course we do renovations, but what is the exact scope of the work? Starting a project and having to interrupt it along the way due to a lack of resources is hardly encouraging. Even expensive.
You must therefore specify your needs and quantify them by soliciting quotes from contractors. So you have a concrete project in hand.
Seven options without financial institutions
If none of the above options come into question, you need to contact the financial institutions.
Three options at financial institutions
Several financial products can meet your needs. Here are the main ones.
8. Personal Loan
The personal loan is not subject to any restrictions. The borrower can use the funds at his own discretion. The interest rate varies depending on the amount borrowed, the borrower’s credit rating, and the promotions offered. Let’s say the renovations you want to do cost $40,000. The current fixed interest rate for a personal loan is around 12.49%, amortized over 5 years. Your monthly payment would be $899.71 for a total price of $53,982.60.
9. Home Equity Line of Credit
When refinancing a mortgage, you can also apply for a home equity loan. In the future, you will have a free hand to use these funds if necessary. And as long as you don’t use it, the margin costs nothing.
10. Mortgage Loans
You can also complete the renovations by refinancing your mortgage, which is due at the end of the month. In such a case, the financial institution often does not charge a fee. Regarding the notary fees, some promotions like cashback may apply, otherwise the amount is around $1000. As for the site certificate, this is usually not required if no outdoor work has been carried out. Let’s say your current mortgage balance is $59,000. So the refinance is $59,000 + $40,000 (work) + $1,000 (expenses), which is $100,000. The current fixed rate for a discounted mortgage is 5.54%, amortized over 5 years. Your monthly payment would be $1909.07 for a total cost of $114,534.52.
Diploma
Ms Plourde, we have listed various options for financing your renovation work.
Which one suits you? It depends on the size of the project and your personal savings. Knowing this information will help you make the right decision.
Advice
Create an overview of the long-term work on your property. This way you have time to prepare yourself financially and avoid surprises.
If you use your credit card to pay for certain expenses, remember that these are short-term payments, typically around 21 days. When due, the fees will be high. So arrange for another type of acquisition financing.