Canadians are embracing DIY like never before and are tackling home renovations at an increasing rate, actively participating in what some term the “HGTV effect”.
A report released from real estate firm the Altus Group shows that Canadians spent a whopping $68 billion on home renovations last year, which marks the 16th year in a row that figure has climbed. It’s not just the totals that are interesting. What these figures show as well is that spending on home renovations has actually surpassed money spent on buying new homes by a significant margin.
Some findings of this report include:
- Canadians spent $68 billion on home renovations in 2014,but only spent $20 billion on new home purchases
- Home renovations have become an important part of the economy, generating 3.4 percent of 2014’s GDP.
- Not all of these home renovations are being done with debt. Only 20 percent of line of credit use has been earmarked for home renovation use
- 40 percent of the respondents in the survey believe that small renos (under $5,000) are being done with cash.
While everyone loves a great deal, there can be implications if you don’t follow the proper process when taking on home renovations. Unfortunately, its buyer beware, and homeowners are well advised to engage in some due diligence.
“Home renovations are a great way to add value to your home. In many cases, it is less expensive than moving and can really help build up your family’s wealth,” says Jeff Schwartz, executive director at the Consolidated Credit Counseling Services of Canada. “In addition to setting up a detailed budget, you need to consider who you are hiring to do the work and how you are going to do it. It could make the difference between your dream home and housing nightmare- which will cost you mentally and financially.”
The selection process
The best way to get the best fit for you when it comes to getting help with your renovations? Budget should be your starting point, but it is also a good idea to talk to several different people/companies (at least three).
If you can get personal referrals or references, perfect. It’s nice if a contractor can supply you with a portfolio so that you can see some of their workmanship. Check their rating with the Better Business Bureau.
Cash deal? Think about insurance
While doing a cash deal for home renovations may seem like a good way to save costs up front, there could be disastrous financial implications down the road, especially if you don’t follow the proper process.
For instance, if you make improvements or modifications that aren’t receipted or done with permits (or other official documentation), they may be compromising your insurance coverage. If your property is significantly changed during the course of a reno, and you haven’t followed the process, you run the risk of being denied for an insurance claim. That could spell debt disaster.
The fine print
Once you’ve established your terms with your contractor, get it all in writing. Include budget, timelines and other items like clean up when the job is done.
When you are setting your own budget, expect that your expenses might run over, so factor a contingency fund in. However, you want to protect yourself against a job that goes on too long or is done unsatisfactorily, which will only cost you more money. Having these elements clearly defined in writing is your starting point should you need to take action in the event of an unfinished or poor job.
Are you wondering how you might be able to improve your financial situation by making improvements to your house? Is your debt standing in your way? Maybe it’s time to renovate your financial house so that you can get to work on fixing up your home. Call one of our trained credit counsellors 1-888-826-5898 or check out our free online debt analysis tool to get started.