Owning a home is something to be proud of. Every year, Canadians show their pride by renovating or improving their homes. In fact, Canadians spent $49.7 billion on home improvements in 2017 (Statista, 2018).
While it's common to use cash or savings to pay for renovation projects, getting a home equity line of credit is also a popular option. The key is to make sure you have a plan in place to pay off the debt quickly.
Here are some tips to help keep your debt in check during your home renovations.
Plan for interest rates
Remember that the payments for a home equity line of credit are variable and based on interest rates. If rates rise, your payments will go up as well.
Have a project plan
Before starting your project, put together a budget that includes a contingency fund. That way you don't have to take on more debt to cover unexpected costs. Setting a timeline for the project can also help you keep your budget on track.
Tackle one home improvement project at a time
Once you get started, it may be tempting to upgrade everything at once. While you're revamping your bathroom, you may get the urge to overhaul your kitchen. Spacing out projects will cut down on the extra interest charges that will mount up if you spend more than you can afford.
Find ways to limit costs
Make sure you keep to your budget when choosing building materials. There may not be much difference in quality between the mid-priced and more expensive products.
Labour is a big renovation cost. Try saving money by doing some of the smaller jobs — like cleaning up — yourself. Or take care of the prep work, such as removing old carpets or trim, before turning your project over to the professionals.
Some projects, like energy efficiency upgrades, qualify for government rebates. Before getting started, research to see if you can offset your costs with these benefits.
Statista. (2018). Home improvement industry sales in Canada 2010–2017. Retrieved from https://www.statista.com/statistics/602413/home-improvement-sales-canada/
Consolidated Credit Counselling Services of Canada. (2017, November 15). Using your home equity line of credit for renovations? Retrieved from https://www.consolidatedcredit.ca/financial-news/using-home-equity-line-credit-renovations/