Planning a Home Renovation

If you are weighing some different renovation projects, take the time to set your priorities. Usually, that will mean taking care of the necessities (a leaky roof) before making your home more enjoyable to inhabit (adding a home theatre room).

Know what you want. The Canada Mortgage and Housing Corporation distinguishes between lifestyle renovations (which improve the enjoyment of your home), maintenance renovations (which help protect your investment), and retrofit projects (which focus on your home’s shell or mechanical systems).

Generally speaking, renovations that improve the aesthetics of your home (such as adding a skylight) contribute less to its resale value, while upgrades to the necessities provide the best payback potential.

Get an expert opinion. If your goal is to paint your home, you may already have an idea of the work involved and the costs. But if you are considering more extensive work, it may be a good idea to get some professional help for your assessment.

A home inspector or architect can help you decide what needs to be done (and whether it can be done) before you undertake your renovation project. A home appraiser can help you do a cost-benefit analysis of the intended renovation.

Tip: If you’re planning extensive renovations, building permits may be required. Speak to your local zoning office about any building codes and zoning bylaws that might affect your plans.

Get an idea of the cost. Get quotes from at least two contractors or renovation experts, giving them a clear idea of what you would like done. It’s also smart planning to factor in a cost overrun — anywhere from 10% to 50%. Ask friends and colleagues about their own experiences with cost overruns.

Choosing a contractor. When you’re ready to undertake a renovation, choosing your contractor will be one of your most important decisions. There is much to consider, including checking out their work references, getting estimates, signing contracts, and knowing what to expect in your home while the work is being done and when it will be completed.

The Canada Mortgage and Housing Corporation provides a number of fact sheets (with extensive and handy checklists) on all aspects of renovation. The Hiring a Contractor fact sheet is an invaluable resource.

Low mortgage rates have been a boon for homeowners. However, as home prices have risen, so too has the cost of trading up to a bigger home. Many homeowners have turned to renovation as a more cost-effective alternative to a new home.

In addition to sprucing up your home and making it more attractive to inhabit, the right renovations can increase its resale value.

According to the Appraisal Institute of Canada, bathroom and kitchen renovations provide the highest possible payback potential when selling a house (75% to 100% of the renovation costs), while interior and exterior painting can help you recoup between 50% to 100% of the costs.

Here are the average payback potentials of other renovations (expressed as a percentage of the cost of the reno):

• Roof shingle replacement (50% to 80%)
• Furnace/heating system (50% to 80%)
• Basement renovation (50% to 75%)
• Recreation room addition (50% to 75%)
• Installing a fireplace (50% to 75%)
• Flooring (50% to 75%)
• Constructing a garage (50% to 75%)
• Window/door replacement (50% to 75%)
• Building a deck (50% to 75%)
• Central air conditioning (25% to 75%)

Fall/winter reno tip: Get your central heating inspected now to avoid the rush and keep your home warm during the chilly winter months.

Check out the Appraisal Institute of Canada’s Tips to Choosing Smart Renovations for more information.

Large or small, eco-improvements can enhance your home’s value. Whether you’re upgrading to spray foam insulation, replacing an old furnace or applying eco-friendly paint, there are a number of government grants available to help you finance your project.

The Scotiabank Ecoliving website is a valuable resource for reno projects, articles and rebates.

If you are making modest renovations on your own (minor painting, for example) paying for the materials with your credit card may make sense, provided you pay your balance monthly.

For more extensive work, resist the temptation to draw cash advances on your credit cards. A personal line of credit is a much more cost-effective way to get the cash you need.

Drawing on a personal line of credit has another advantage: you pay interest only on the amount borrowed. This can be particularly useful when paying a contractor in stages.

For major renovations, you may want to tap into the equity you have built in your home, which can lower your borrowing costs. Your home equity is the current value of your home less what you still owe on it. For example, if your home is valued at $300,000 and your outstanding mortgage is $150,000, your equity is $150,000.

Speak to your advisor about the best way to finance your renovation project.