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Home renovation and decorating shows are pushing some Canadians to opt for the “
The survey found that 60 per cent of Canadians who have renovated their home recently developed a budget before starting their project. However, 27 per cent of renovators spent more than they planned.
“Maintaining a renovation budget can be challenging, especially when home improvement TV shows and magazines stir-up consumer appetites for the latest in home appliances and decor,” said Maria Racanelli, Vice President, Personal Banking, BMO Bank of
The ability to anticipate extra costs through appropriate financial planning can reduce the stress of home renovations. Experts suggest securing financing prior to the renovation, such as a Personal or Homeowners Line of Credit, which provides the financial cushion most home renovators require.
“Having a line of credit available doesn’t mean that you have to use it, but it does provide added security if you hit unexpected expenses such as re-wiring your home,” says Racanelli.
While the survey showed that 68 per cent of Canadian homeowners use cash from savings or investments to pay for renovations, a lack of planning could mean financial challenges down the road. The survey also showed that 34 per cent of homeowners are borrowing to renovate.
To help homeowners who are considering renovations, Ms. Racanelli offers the following financial planning solutions:
· Think long term when making financial decisions
- Whether you are spending cash from savings or borrowing to renovate your home, take the time to meet with a financial planner to ensure you know all the options.
- While you may view your renovation as a short-term cost, take a long-term approach to ensure that you maximize your savings.
· Take care of your debt first and consolidate
- Freeing up cash is always helpful.
- Review your finances to understand the implications of your outstanding debt and the amount of interest you are paying.
- Where possible, consolidate debt under a preferred lower interest borrowing rate, (e.g., as low as prime 1).
· Increase your overall worth by leveraging your assets as equity
- Understanding that every investor’s and homeowner’s situation is different, a financial advisor can provide solutions that are right for you.
- Whether you are planning a renovation using savings, a Homeowner Line of Credit or a Personal Line of Credit, balancing short-term financial needs with long-term financial goals should always be top of mind.
Home Renovation Survey Facts:
· Toronto homeowners were most likely to state that recent gains in the housing market influenced their decision to renovate (23 per cent), while 18 per cent in
· Toronto homeowners were also the most likely to state they were influenced by home decorating or renovation television programs (30 per cent); compared to those surveyed from Halifax, where only 21 per cent said the shows were a major influence.
Renovations budgets by regions*
|
City |
Less than $10,000 renovation |
$10,000 but less than $25,000 |
$25,000 but less than $50,000 |
$50,000 or more |
|
|
55% |
22% |
8% |
7% |
|
|
72% |
14% |
1% |
1% |
|
|
70% |
15% |
2% |
3% |
|
|
60% |
23% |
8% |
3% |
|
|
67% |
15% |
5% |
8% |
· Montreal homeowners were most likely to have sought or will seek advice from a financial professional before renovating (22 per cent) compared to 15 per cent in Halifax, 13 per cent in Toronto and 12 per cent in Calgary.
· Vancouver renovators were most likely to have paid for their renovation through savings or investments (77 per cent) compared to 50 per cent of renovators in Halifax who used cash.
· 11 per cent of renovators in Halifax and 9 per cent in Montreal refinanced their mortgage to free-up cash versus 3 per cent in Vancouver and Toronto and 2 per cent in Calgary.
Note to editors: The BMO Renovation Poll was conducted by Decima Research between September 8 and September 21, 2005 and was based on a randomly selected sample of 1,006 Canadian homeowners who have renovated in the past three years or intend to renovate their home in the next two years in five major cities (Vancouver,
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