Are you in the market for a house in the GTA? Chances are you’ve considered a fixer upper. A fixer upper can be a great way to afford a home in your dream neighbourhood – when it’s done right. Before undertaking renovations, it’s important to do your homework. That last thing you want to do is to take on more than you can handle. Here are some things to look at when deciding whether a fixer upper is right for you.
Do Your Homework
Before buying a fixer upper, it’s important to do your homework to avoid taking on more than you can handle. A home inspection is money well spent. It can give you an idea about exactly how much money you’ll need to budget for renovations and help prioritize your home reno budget. You might also want to call in a licensed contractor to give you a quote ahead of time to make sure you won’t be caught off guard by any costs. The last thing you want is to discover a major issue after you move in that you didn’t anticipate or budget for. If you find structural or mold, you might consider walking away without making an offer. This can save you a lot of money in the long run.
Four Ways to Finance Home Renovations
Ok, so you’ve decided to buy a fixer upper. Congrats! So how the heck do you pay for the renovations? Here are four ways to finance your renos.
- Savings: You can hold back some of your down payment and use your own use your own savings (if you have less than a 20 percent down payment, it’s important to consider whether the higher mortgage insurance premiums will be worth it).
- Home Equity Line of Credit: If you’re putting down at least 20 percent, you can take out a home equity line of credit. A home equity line of credit makes the most sense if you’re planning to do major renovations later on or the renovations will be done over a longer time period. The advantage of a home equity line of credit is that interest is only paid on money that is withdrawn.
- Unsecured Line of Credit: If you haven’t built up enough equity in your home to do a home equity line of credit, you can do an unsecured line of credit instead. The interest rates are higher than a home equity line of credit, but if you don’t have the savings, it’s a lot less costly than carrying a balance on your credit card.
- Purchase Plus Improvements Mortgage: A purchase plus improvements mortgage is specifically designed to help finance home renovations. Here’s how it works: you can add the lesser of 10 percent of your home’s purchase price or $40,000 in renovations that boost your property’s value. The costs of the renovations is then added to your home’s purchase price.
Are you still on the fence about whether a fixer upper is right for you? Are you unsure of the best way to pay for your home renovations? A mortgage broker and financial planner can lay out the basics and help you make the best financial decision. We have a team of experts on hand to assist you. Feel free to contact our office today. When it comes to purchasing a fixer upper, it pays to have the right professionals (contractors, home inspectors etc.) working for you.