Pay Off Debt to Increase Renovation SavingsJul 26, 2017
arm weather marks the start of construction season and for many Canadian homeowners that means home renovations—sometimes at the expense of saving for retirement or paying off debt. According to a recent BDO Canada poll, 57 per cent of homeowners plan to complete a renovation within the year, but for a quarter of them, it means not paying off debt as fast as they would like to.
Home renovations can add to the value of your home. But relying on debt to cover costs can have a negative impact on your finances. That’s why it’s important to have a plan to budget and pay off debt.
Homeowners who are renovating predict it will take them an average of 2.5 years to pay off their renovation debt. If you’re borrowing in order to renovate, ask yourself these questions first:
Do you know how much interest you’d pay over the course of two and a half years if you end up paying with credit cards or loans?
How long will it take to pay off your debt? (Will you still be paying off debt when you need another renovation or repair in the future?)
Will your home reno debt affect your ability to save for emergencies and retirement?
If you know how much you plan to borrow, a debt calculator can help figure out how long it will take to pay off your renovation debt.
How to minimize the financial impact of home renovation debt:
- Make a monthly budget and a renovation budget
- Pay off your existing debt so you can save for home renovations ahead of time
- Learn as much as you can about debt and borrowing so you can make an informed decision before you renovate
- Understand what debt relief options are available to help you get out of debt.
The impact of home renovation debt on your finances will depend on the amount of debt you take on. Don’t let too much reno debt hamper your ability to save for other financial priorities like retirement and an emergency fund.
If you can’t afford an extensive renovation without adding to your debt, tackle less expensive reno projects or focus on paying off your debt first. This gives you more opportunity to put savings aside — so you can tackle those bigger renovations with cash instead of debt.
Share your best cost-cutting tips to help others like you put more into their savings accounts by using the hashtag #DebtSolutions on Twitter.