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Little did I realize when my parents passed away and bequeathed me the 100-year-old family home, they were leaving me a property that would raise my blood pressure as much as it would raise my financial worth. Don’t get me wrong: I know how lucky I am to have a home. But the property I inherited came with a long list of costly, urgently-needed repairs, and, as my bank-busting home renovation costs started to add up, I sometimes felt as though my beloved property was more hindrance than home.
Taking on a slew of home renovations can be one of the most stressful and expensive experiences in a homeowner’s life. Luckily, it’s possible to find a happy balance between your budget and your list of dream updates and improvements. Here are some ideas to help you figure out how to pay for home renovations.
Average Costs of the Different Types of Home Improvements
Kitchen (Budget: $25K to $50K+)
Kitchens are often described as the heart of the home—which explains why they are among Canadian’s most popular renovations. Unfortunately, a new kitchen often has the biggest price tag compared to other home renovations. According to Homestars.com, on average a kitchen renovation can set homeowners back approximately $30,944, or $195 per square foot. The price can go up significantly if you add custom cabinetry, expensive finishes, and first-rate appliances. For myself, I budgeted at least $50,000 for a new kitchen because I want to have a wall taken out and to add in a window. At least if you’re going to spend a lot, it’s good to know that a new kitchen is considered one of the renovations that provide the highest return on investment.
As my bathroom renovator told me, “In a lot of ways, once you get past the basics, the cost of a reno is up to you.” The final price will depend on the finishes you choose, whether you want a custom vanity and if you move your sink or bathtub around (which means you’ll need new plumbing). For my bathroom, I had naively budgeted $20,000, but when I decided I wanted a separate shower and bathtub, as well as heated flooring, I had to move my budget up to $30,000 (and counting…). On average you can expect about $15,000 for a basic, no-frills reno or as much as $40,000 if you do a complete tear-down and need extensive new plumbing put in.
If you’re doing anything beyond new paint and flooring, you can expect to pay anywhere from $35,000 and $50,000, and even more if you’re actually digging out the ground and adding a few feet of foundation to create more height.
The price of landscaping varies hugely on what you want to do. A new deck or fencing can both set you back at least $5,000. For a complete overhaul of your yard into an Instagram-worthy green space, you’re likely looking at between $12,000 to $28,000.
Energy Efficiency Upgrades (Varies)
The renovation costs of energy-efficient upgrades vary dramatically. Changing out your old lightbulbs for new energy-efficient LEDs and adding some weatherstripping to doors and windows could cost under $100, whereas upgrading your furnace could set you back $5,000. New windows with double-paned or triple-paned glass and high-quality window frames could cost you well over $10,000.
Where to Start: Which Home Improvements Add the Most Value to Your Home?
Obviously, you’ll want to start with which part of your home is in most need of urgent repair. While a new kitchen with a nice gas stove, a cute pantry and a sweeping marble island may be on your wish list, the wisest thing to do is to make a renovation list based on which spots in your home most need fixing rather than what you want to be fixed. In my case, I made my first renos based on safety: I updated the electrical wiring (it was knob and tube) and got rid of all the old galvanized plumbing.
Those safety renos were very expensive and boring (in that they don’t add anything to the aesthetic appeal of my home) but they did decrease my home insurance costs. My current renovation project is the upstairs bathroom. Though my heart wanted to renovate the kitchen (it’s from the 70s) my head said to repair and renovate the upstairs bathroom, which has plumbing and wood rot issues.
Once you’ve taken care of urgent issues, then you can focus on renovations that will make your house easier to live in and more aesthetically pleasing. That’s when you can start to think about which renovations will best boost the pleasure you take from living in your property and raise its value as an asset. Generally speaking, the renovations that offer the most return on investment are:
- New or improved kitchens: 75% of 100% of the renovation cost
- Low-cost improvements (painting, new wallpaper, new rugs): 50% to 100% of the renovation cost
- New windows or doors: 50% to 100% of the renovation cost
- Basement renovation: 50% to 75% of the renovation cost
- Energy efficiency upgrades: 60% of the renovation cost
The above refers to the average recovery rate — the percentage of your cost that you may recover when you sell your home. For example, a kitchen makeover can boost the value of your home by between 75% to 100% of what you spent. So if you undertake a $50,000 kitchen reno on your $400,000 home, your house would then be worth between $437,500 and $450,000.
Source: Appraisal Institute of Canada
How to Finance Home Renovations
Now we come to what often is the biggest barrier to doing home upgrades: How to pay for home renovations. If you don’t have a bundle of money sitting in a bank account just waiting to be used to cover your property repairs, you’ll have to look to other methods of financing. Here are some of the best strategies to cover the cost of your house renovation.
Normally, it’s not advisable to finance a home reno with a credit card because the interest rates are usually much higher (19%+) than those offered through a personal loan, a line of credit or mortgage refinancing. However, the CIBC Dividend® Visa* Infinite Card – among other eligible CIBC credit cards – features an innovative installment payment feature called CIBC Pace It™. The feature lets you pay off big purchases in manageable monthly installments at a lower interest rate. You can choose between three different plans with different rates & terms without any additional need for credit checks or pre-approvals, and you’ll only be charged a one-time installment fee of 1.5% of the purchase price. All things considered, CIBC Pace It™ could really help you better manage your renovation costs.
Another reason to go this route? The CIBC Dividend® Visa* Infinite Card has great earning potential with 4% cash back on eligible gas and grocery purchases, 2% cash back on eligible transportation, dining purchases and recurring payments, and 1% cash back on all other purchases† (including home renovations). So charging that new granite sink or gleaming Quartz countertop for your kitchen makeover will actually have a pay-off.
Obviously, the preferred way to finance home renovation costs is by saving up for them beforehand. It’s pretty much the most affordable way to pay for property updates because if you use your own savings you don’t have to pay any interest. In fact, if you put your renovation fund in a high-interest savings account you could actually make some money and see your savings really grow steadily thanks to interest rates ranging anywhere from 1% to 2%. Furthermore, most of the top high-interest savings accounts in Canada have no or very low fees, so you won’t see your savings erode because of high fees.
Get a Personal Loan
Of course, saving up enough money to pay for home renovation costs is not possible for many Canadians, no matter how responsible they are about personal finances. That’s why for some people a personal loan may be the best option. There are hundreds of lenders in Canada that offer secured or unsecured loans, even to those with bad credit. There’s also a wide range of repayment terms and personal loan interest rates available. In fact, there are so many lenders out there that choosing the right one can be overwhelming, so be sure to take the time to compare the best personal loans to find the right match for your needs.
Mortgage refinancing is another good option to pay for home repairs. Often with mortgage refinancing, you can get a lower interest rate than with a personal loan. There are lots of traditional and online brokers available in Canada that can help you navigate the refinancing process.
Grants, Loans and Rebates for Energy Efficiency Upgrades
Cutting your home renovation costs with government grants and loans is an all-too-often overlooked way to make home repairs more affordable. Canadian federal, provincial and city governments and even utility companies frequently offer grants, loans and rebates for energy-saving home repairs. The Government of Canada website features an excellent overview of all the various money-saving programs available in each province and territory.
Home renovations can be a hassle, especially when your house is torn apart and you’re forced to live in shambles for a time. But the pay-off is worth it! At the end of the project, you’ll not only have a beautiful new space to enjoy, but you’ll likely add value to your home if you’re doing high-return renos. If you don’t have the money to sink into your home renovation, consider financing the project. A low-interest credit card like the CIBC Dividend® Visa* Infinite Card is an excellent option and offers a manageable payment plan for big purchases. Consider it an investment!