(NC)-Renovations do not always translate to an increase in the value of your home. However, if you're planning to sell sometime in the future and want to ensure you get the most bang it is important to assess the value renovation.
Value-neutral and value-added renovations
Surprisingly, as nice as it sounds, adding a swimming pool, or building a sauna or hot tub are considered value neutral renovations. This means there is not much payback in installing these features in your home. You can also expect the same for installing paving stones to the driveway and reducing the number of bedrooms to less than three.
On the other hand, modernizing a kitchen and updating a bathroom are regarded as value-added renovations. The same can be expected by creating a master bedroom with an ensuite bath and/or walk-in closet; and by remodeling or adding a family room, especially on the main floor.
Cost-effective options
Coming up with extra cash for a home renovation is not easy, especially if you're juggling several financial responsibilities - including a mortgage, RRSP contributions and car payments. Finding a cost-effective financing option is a must, particularly if you're planning a major home improvement project. Consider for example the CIBC Home Power Plan, which provides the freedom and convenience of a secured line of credit coupled with the security and peace of mind of a mortgage.
This means that by using the equity in your home you can take advantage of lower interest rates with the secured line of credit than a credit card. It also allows you to enjoy ongoing access to funds available when you need them. And if you prefer the security of knowing that your interest rates will remain stable for the term of your mortgage, you may want to consider a fixed rate mortgage. If the rates are better than what you're currently paying, then you'll save both on your mortgage payments and on the interest on your secured line of credit.
Having a low interest rate on borrowed funds allows you to maximize the value of your renovation. For example, the total cost of the new kitchen and bathroom, including interest, may be offset by the increase in the value of your home.
More information on this topic is available at your local CIBC branch, toll-free at 1 800 465-CIBC (2422) or online at www.cibc.com.
- News Canada