If you do select the renovation route, here are some tips to guide you along the way:
Unless you’re planning on selling your house in the very near future, the renovations you choose should be for you – not a less than perfect compromise aimed at increasing the value of your home. Review the building plans until you’re absolutely sure that every aspect of the renovation is exactly what you want. Avoid the temptation to make costly and time-consuming changes during the process.
Builders and contractors should be selected with care; ask for references and check them carefully. Contribute your labour, where feasible, to help keep costs in line. Even if you decide to use an architect or general contractor as the project manager, you’ll still be required to make quick decisions about unexpected developments. Knowing the score will help you make the right choices.
Set a realistic budget and do everything you can to stick to it. Keep a detailed running account of costs and constantly compare it to your budget. Small renovations can be funded from a line of credit, but larger projects my require construction financing – a bank loan based on an appraiser’s evaluation of the finished home, with money usually released at specific points during construction (usually at 35%, 70% and 95% completion). Be prepared to cover all interim costs until each construction milestone is met. It may be possible to use the new construction financing to replace an existing mortgage at a much lower interest rate. Be prepared by setting aside a contingency fund of at least 10 per cent.
This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your financial advisor.