Renovating is one of the most common reasons Albertans borrow against their homes, and one of the better ones, because the money goes back into the asset that secures the loan. But not every renovation adds as much value as it costs, and the way you borrow matters.
Projects that tend to hold their value
No renovation is guaranteed to pay for itself, but these are commonly valued by buyers and appraisers:
- Kitchens and bathrooms, when done to a standard that fits the neighbourhood
- Essential systems, such as roof, windows, furnace, electrical and plumbing
- Finishing usable space, like a basement developed to code
- A legal secondary suite, where permitted, which can add rental income
- Energy efficiency upgrades that lower running costs
Projects that suit very personal tastes, or go far beyond the rest of the street, usually recover less of their cost.
Choosing how to borrow
- Line of credit: draw money as each stage is paid, and pay interest only on what’s used. Good for projects with uncertain costs.
- Refinance: take the full amount up front, often at a lower rate than a line of credit. Good when the budget is firm.
- Second mortgage: keeps a low-rate first mortgage intact.
See ways to access your equity for the trade-offs.
Build in a buffer
Renovations almost always cost more than planned. Add a contingency to your budget, and don’t borrow every last dollar of available equity for the project itself.
Permits and contractors
Get the required permits and use reputable, insured contractors. Unpermitted work can cause problems with insurance, appraisals and selling later.
After the work: your home’s new value
A good renovation can raise your appraised value, which may help when you refinance or renew. Keep receipts and a list of what was done. They help appraisers. See how lenders value your home.
This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.