A common reason why people refinance their homes is to renovate, but is it always a good idea?
We’ve found many instances where people are refinancing to upgrade their homes, add more features in, or fix the roof that’s falling in. It seems like a NO BRAINER – you take money out of the house to put value back in your home. You can’t really go wrong right?
There’s a very good blog that we’ve come across written by Mike Holman who writes for Money Smarts Blog and he made some very interesting points that we think are very important to share with you.
Make your own conclusions…
Sometimes renovations can DETRACT from the value of your home.
1. Unusual or excessive renovations
For example if you really liked gold and you’ve decided to guild your entire bathroom in gold leaf, it would seem like a fantastic idea, but for potential buyers they might not see it that way.
For a potential buyer they could probably be thinking how much money they would need, in addition to purchasing the house, to restore the bathroom to it’s original state.
So for buyers who don’t like your gold bathroom the value of your home would go down even though the physical value of the gold has already been put in.
Keep that in mind!
2. Average Home Prices within the Neighbourhood:
This is something you should really keep in mind when doing your renovations.
You should always try to keep your home’s price within the same range as the average house within your neighbourhood. Not to say that you don’t want to have a nice yard or nice flowers, but if you have the one outstanding craftsman’s mansion in your neighbourhood of poorly priced homes then there’s going to be definite problems!
The problem with having a home that is valued above the average price of homes in your neighbourhood is:
- It’s difficult to sell your house
- It’s hard to get a mortgage
Just because you’ve put in however much money into your home for renovations, if your home is surrounded by a neighbourhood of poorly priced homes, the value of your home won’t be supported for long. Therefore, Lenders will not see the value of your home.
So just keep those things in mind!
If you have any questions on refinancing, feel free to call us at 1-866-521-9557 or email at email@example.com.