How To Choose Between Renovating & Dealing with your DebtMay 12, 2018
Although you may be focused on paying down the consumer debt you owe in 2018, the nicer spring temperatures may have you considering if 2018 is also the perfect time for a few upgrades to your house or condo.
However, choosing between fixing up your home or paying down your debt can be a difficult decision to make. On one hand, home renovations can help to increase the value of your home. On the other, there is an 80 per cent probability of another interest rate increase planned for some time this month. Considering the current economic climate, with the rising cost of living in the GTA and high consumer debt, it may not be the best time to add to your debt load. Here are a few questions to ask yourself to help you make a sound and financial smart decision:
Can I really afford to renovate?
Before diving into a big renovation project, it’s a good idea to review your finances and evaluate your financial standing. Although your initial estimated costs may be doable, an interest rate increase would mean your mortgage and other payments may increase as well.
It’s also important to note that the estimated cost of a renovation and the real cost of a renovation project are rarely the same. In fact, according to the personal finance blog Give Me Back My Five Bucks, it’s actually a good idea to include 25 per cent more in your home renovation budget in order to account for any extra or hidden expenses or surprises.
Is a renovation really beneficial?
If you are renovating in order to increase the value of your home, you may want to hold off for now. Although some home renovations can help increase your home’s worth, many upgrades, such as the addition of a pool or a home office conversion, do not actually add much to your home’s overall value.
Another thing to consider is the current real estate market conditions in North York. Due to recent mortgage regulation changes and rising interest rates, the Toronto market is starting to cool and property values are following suit. Consider talking with a Real Estate professional to evaluate the current value of your home before the renovations and if doing some upgrades will really be a good value for you buck!
Will a renovation take away from my other financial priorities?
The final question to ask is whether a home renovation will take your focus away from other important financial priorities like reducing your consumer debt, saving for an emergency or paying off the student debt you owe. Although a renovation would be nice, it’s not so nice if it causes you to neglect your other financial priorities and goals.
Remember, although this year might not be the best time to renovate, it doesn’t mean that you need to put your renovation plans on hold indefinitely. Instead, add a home renovation to your current list of financial goals and work towards making it happen in the near future.