5-minute read

Looking to renovate your home or cottage but don’t know where to start? We hear you. There are so many things to consider before you can make informed decisions about your plans.

So, before you even start thinking about renovating and possible financing solutions, take a few minutes to evaluate your financial and personal situation.

1. Plan your project the smart way.

Analyze the scope of work after receiving several bids from different contractors. The cost and extent of work will often point to the best financing solution. This step is obviously crucial, since it helps determine your financing requirements. You need to share this information with your advisor.

Evaluate your repayment capacity and review your budget with your advisor to ensure you can maintain your lifestyle while meeting your various financial commitments. Drawing up a budget lets you determine whether your personal income is high enough to continue to meet your savings goals, pay your various debts and aptly handle unforeseen events. By planning and organizing your finances effectively, you also reduce your stress level.

Consider your experience. Is this your first renovation project, or have you financed a renovation before? Depending on how comfortable you are with financing, you may be interested in a few solutions. You’ll also need to consider your personal and mortgage situation. A good time to visit your advisor and discuss your plans is when it’s time to renew your loan. With your advisor, you can look at whether your residence has gained enough value to free up equity to finance your projects. An expert's advice can offer solutions that you may not have thought of.

2. Choose your financing solution wisely.

Remember that the best financing option is different for everyone and is based on your needs and your situation.

Situation 1: Small to medium renovation project.

For example: Changing a door or windows.

Personal loan: To lend you a hand with this type of project, you can apply for a personal renovation loan, which carries a relatively attractive interest rate and is especially designed for this sort of project. The advantage of a personal loan is that it can be repaid over a short period with fixed payments. You agree to pay a predetermined amount of capital and interest calculated for the desired term.^†

Personal line of credit: This is a highly flexible solution because once your loan application is accepted and your credit limit authorized, you can use your personal line of credit whenever you need it. It doesn’t have a repayment term. However, to use it wisely, you must be disciplined and make regular payments. Your credit rating is directly influenced by your credit behaviour. That’s why you need to make sure you use of your line of credit sensibly for your minor projects.

Situation 2: You own a property with equity.

Did you know that your property can give you access to low-cost financing?

For example: Expanding or adding a garage.

Home equity line of credit:

Like the personal line of credit, a home equity line of credit can be a flexible and attractive financing method, since it costs nothing when not used. Interest applies only on amounts used. This solution is highly attractive for owners who want to finance projects that don’t affect the property’s structure. It carries a lower interest cost than personal financing, because the line of credit is secured by the property.

Is your project completed? Convert your line of credit into a loan.

Once your project is completed, you can convert the balance of your home equity line of credit into a new mortgage loan. But why do this? To further reduce your interest cost. Indeed, as mortgage interest rates are generally lower than on a home equity line of credit, this is a valuable solution for your portfolio. A mortgage is also a secure solution for your budget, since you pay a fixed amount of principal and interest over a set amortization period.

Homeowner's Kit: Are you an experienced borrower with a proven track record in managing your income and expenses? Do you know how to manage credit wisely? If you’ve already repaid at least 20% of your home’s current market value, you can use your principal residence to carry out new projects. The Homeowner's Kit is a solution that brings together different mortgage financing products: lines of credit and loans. A financing envelope is established based on the capacity and quality of the borrower (you!). Approval is required to obtain available credit in an amount equal to or greater than the financing required for a specific project. As a result, an amount is available for your future needs and to set your mind at ease.

Situation 3: You’re about to buy a property.

“Purchase with renovation” mortgage: If you’re already considering work on a property that you’re about to buy, this financing option incorporates the cost of possible renovations in the initial financing. You can therefore amortize the repayment of your renovation project over several years. As certain, more specific conditions apply with this option, make sure to talk with your advisor to determine if this is the choice for your project. For example, if you buy with a minimum downpayment and are already planning to do renovations at the time of purchase, this product could be ideal for you.

3. Protect yourself from unforeseen events.

If you need credit to carry out your renovations, avoid risks and protect yourself from unforeseen events with credit insurance (life or disability insurance). By enrolling, you guarantee that you and your family can support your needs in case of unforeseen events.

Finally, don't forget that the key to good financial health is to stay within your limits and ability to repay.

4. Consider saving through subsidy programs.

To obtain attractive savings, learn about government and municipal subsidy programs that could apply to your situation. For example, there are grants available to residential building owners who want to renovate through the Renovation Québec program. If your work is intended to improve your home’s energy efficiency, check if you’re eligible for the Rénoclimat program.

Need advice? We’re here to meet with you and discuss your needs. Book a meeting today.

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