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BDO Brampton

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Brampton, Ontario L6X 1R2
Phone: (905) 457-2042

Considering A Renovation? Get To Know Your Debt First!

Thinking about tackling that home renovation you’ve been considering for a while? Although a renovation can definitely be an exciting project and can even add value to your home, it’s also a good idea to consider a few things before you start, particularly if you are considering adding more to your current debt load in order to get the job done.

As discussed in our latest podcast, asking the right questions and checking in with your current financial situation is a good way to determine whether now is really the right time to renovate. These questions include:

  1. Can you really afford to renovate?

Maybe you’ve already established a budget and are comfortable using your Home Equity Line of Credit (HELOC) in order to help finance your reno. Although it’s best to try to avoid going into debt when renovating, if you do need to use the equity in your home in order to renovate, it’s important to remember that this variable interest debt is susceptible to rate hikes. It’s also important to remember that most experts predict interest rates will increase again before the end of 2018.

  1. How could your mortgage change this year?

Changes to your mortgage could potentially impact your ability to comfortably afford a renovation. In addition to rising interest rates that could affect your monthly mortgage payments, you, like many Canadians, may also need to renew your mortgage. This year, however, there’s a catch. New mortgage regulations mean that many Canadians need to pass a mortgage stress test in which they must financially prove that they can afford a mortgage at a rate that’s actually higher than their current interest rate.

  1. How able are you to repay the debt you currently owe?

It’s not just interest rates that are increasing. Consumer debt is also on the rise in most Canadian households. Statistics also show that many families are living paycheque to paycheque.

Although you may feel comfortable with the amount of debt you’re carrying, it’s important to consider how other financial changes, such as a larger monthly mortgage payment, could affect your ability to repay your debt. If you’re uncertain, focus on reducing your household debt before moving ahead with your renovation.

  1. How could a renovation affect your other financial goals and priorities?

Lastly, it’s also important to not get too caught up in the excitement of a renovation and forget about your other financial goals such as saving for retirement or reducing the amount of credit card debt you owe.

Checking in with your mortgage and non-mortgage debt, determining whether you can really afford to renovate and taking stock of how a renovation could impact your other financial goals and priorities are all essential when it comes to figuring out whether you are really ready to renovate.

Do you think you are ready to renovate this year? How will you avoid adding more to your current debt load? Join the conversation and share your thoughts with BDO Brampton using the hashtags #HomeRenovation, #DebtSolutions



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