When You Should, And When You Shouldn’t Finance A Renovation

Tax Credits Are Available but Consider the Cost Before Committing

The Canadian Government has offered a tax credit for home renovations. Canadians could benefit from this incentive for allowable expenses upwards to $5,000.

A challenge with these tax credits is that many taxpayers are unaware of the actual cash benefit they could receive before they start renovations. If a homeowner doesn’t have enough savings to afford their home renovations, before the tax credit offer expires, they could end up spending more on interest than they earn from the actual cash benefit.  Homeowners should seriously consider the cost benefit before commencing.

Are Your Renovations Within Your Budget?

If the answer is no, then is strongly recommended that a homeowner should wait before a significant amount of money to spend on home renovations. If an individual is willing to do their own renovations, they may need to plan out their availability to ensure they are able to complete their renovations their target deadlines.

There are situations where home renovations are necessary, even if the home owner doesn’t have the savings, such as:

1.       An unforeseen event occurred that requires altered the layout of a home.

2.       Aging parents moving in, a new child is born, an adult child is moving back home.

3.       The homeowner needs to sell their house and they desperately need to invest some money to make the house sellable

4.       Empty nesters requiring modifications to the home to accommodate its aging tenants

5.       Creating a basement suite for rental purposes.

Financing your renovation can be favourable

Before you speak with an account manager at your local bank, you may want to weigh the pros and cons of adding debt. The following scenarios are considered favourable when deciding to pursue financing.

1.       The cost of financing can be afforded from the additional income generated from rental income

2.       If you have allocated your budget to easily afford the monthly financing payments.

3.       You entered into a contract with a general contractor and you are on a progress billing cycle

4.       You may want to hedge your risk if litigation by paying your contractor on time.

Create A Solid Pay Back Plan

If there is no set plan on paying back the newly added debt then we strongly discourage homeowners from moving forward with their plans to renovate their place. A homeowner’s lack of foresight and financial planning can be harmful to some or all of the businesses they hire. We’d love to speak with you to help you review your financial options for your renovation needs.