By Jasmin Brown - Licensed Insolvency Trustee

BDO First Call Debt Solution

How to Avoid Too Much Renovation Debt

Apr 11, 2019 | 9:49 AM

Summer is coming and you have renovation goals. The question is, how much debt are you willing to take on to meet those goals?

When the weather begins to warm up, a lot of homeowners get renovation fever. An outdoor deck or a brand new kitchen suddenly seem very appealing. No matter what project you have in mind, it will inevitably come with a price tag. Now is the time to map out how you will budget for those additional costs.

Draw up your financial blueprints

Before a contractor can start work on your home, they need a clear view of the work involved, the tools and materials they will need, the time it will take, and the cost to you. The same is true for your finances. Before you commit to a renovation, ask yourself these questions:

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· Do I have enough money saved to pay for this project in cash?

· Can I comfortably afford to take on renovation debt in addition to my existing debt load?

· Will a renovation cause me to delay repaying my existing debt, like student loans or credit card balances?

Choose the best debt-avoidance strategy

Based on your answers, create a strategy that works for your financial situation. For example,

1. Put off your renovation in order to save up more money. Figure out how much you will need and make a budget to help you reach your goal. Remember to be realistic and give yourself a flexible timeframe.

2. Consolidate your existing debts to make your monthly payments more manageable. If you are unsure whether consolidation is the right debt solution for you, speak to a debt professional who can explain your options. This repayment options calculator can also help you compare different solutions.

3. Scale back your project so it is affordable. Or renovate as you go — update areas that you can pay for with cash, little by little.

What financial goals are important to you?

In all likelihood, paying for a renovation is not your only goal. Before you commit to a renovation project, take the time to list your short- and long-term financial goals. Are you saving for your children’s education? Contributing to RRSPs? In the market for a new vehicle? Now is the time to review or rework your budget to ensure you have a balanced plan that allows you to pay for your renovation, save up for other important goals, eliminate any outstanding debt and meet all of your financial responsibilities.