Let's imagine you've found the house and you love it, but you can see that it needs some renovating. You may want to consider some points in order to determine how much mortgage money you'll need to cover the costs of making these changes. You should get the answers to the following questions:
- How much work does this renovation entail?
- Is it worth doing, given the basic fabric of the house?
- Can it be done at a price you can afford?
- Can you get mortgage money to cover these anticipated costs?
- Will the changes add to the value of your house at resale time?
- How long will it take to complete the renovations?
- Must your family move out while the renovation work is in progress?
Some renovations add great value to a house, thus increasing your equity in it, but not all do. Most informed people realize that it's unwise to spend money on schemes that will not prove financially beneficial when the time comes to sell your home. Where is renovation money best spent?
- Year after year, kitchen and bathroom renovations, as long as they are well done, have proved to be the best place to spend your money. At resale time, the typically return 75% to 100% of the money you have invested in these projects.
- Replacing the roof brings a 50 percent to 80 percent return on money spent.
- Finishing a basement, adding on a family room, installing hardwood floors, installing air conditioning, new doors and windows, building a deck or garage: these all yield a 50 percent to 75 percent payback.
- Installing a swimming pool rarely increases the value of a home, but if you can afford one and if its important for your family's long-term enjoyment, perhaps this is one time you can allow yourself to overlook the low financial returns.
In closing, just remember not to turn your home into the most expensive house on the street. Don't improve your home to the point where it is the richest in the neighbourhood: such houses, can sometimes be difficult to sell in a not so hot market.