In light of the historically low inventory in the Toronto housing market, many homeowners are now deciding to refinance their homes to pay for major renovations. This is a great way to upgrade your living situation when moving to a new property isn’t feasible. Today I’m sharing everything you need to know about refinancing your home for home improvements, so that you’ll know if this is the right move for you.
Choosing Your Project
In order to ensure that this is a smart financial decision, you need to carefully select your home improvement project. Historically, certain renovations do a better job of increasing your home’s value than others.
- A renovated kitchen almost always increases home value, since most people consider the kitchen to be the ‘heart’ of their house.
- Improved lighting can also add value to your house – whether it’s be adding pot lights, a sky light or removing interior walls to let more light through the house.
- Energy efficient upgrades are another way to add value. Homebuyers recognize that these upgrades can save them money in the long run (and they’re good for the environment), so they’re willing to pay a bit more for it.
- Swimming pools require a lot of maintenance, and can be a hassle to own. Adding a swimming pool to your backyard will not necessarily add value to your house.
- Likewise, extensive landscaping is also not guaranteed to add value. Some homebuyers will see this as a disadvantage because it requires lots of upkeep and attention.
- Renovations that can’t be seen – such as a new furnace or plumbing system – also don’t guarantee an increase in home value. Homebuyers expect to have these things working to begin with, and won’t be willing to pay extra for the house because of it.
The Benefits Of Refinancing Your Home
One of the biggest benefits is the fact that you will have immediate access to money so you can start your home improvement project right away. Another benefit is that your new loan may have a lower interest rate. Above all, the fact that you are refinancing to add value to your home makes this a smart move.
Refinancing Your Home For Home Improvements Is Right For You If….
- … you plan on increasing the size of your mortgage by $20,000 or more. Because of the legal and appraisal fees, increasing your mortgage by anything less than $20,000 might not make sense financially.
- … you plan on putting the money towards a home improvement project that has a high likelihood of increasing your home value.