Many homeowners are reevaluating their needs after spending more time than usual at home for health and safety, but what do you do when a closure means loved ones have to move in with you?
Even planned home renovations can be expensive, but having to renovate on short notice can mean having to make financial decisions quickly.
Here are ways homeowners may finance unexpected expenses or home improvement projects.
1. When a Parent has to Move in
“As soon as COVID-19 breakouts in nursing homes hit the news, Mum got out sooner than we planned,” says Jen Thorne of South Surrey, B.C. “And then we went to work renovating our basement suite.”
Jen and her brother Dan, a contractor who lives with his family nearby, are thankful they were able to move their mother Marjorie when they did — the Peninsula Retirement Home shut its doors to visitors one day after she left.
Marjorie is mobility-challenged and has osteoporosis, so renovations required more than a quick fix. Dan installed a big walk-in shower. He repositioned and widened all the doorways, and built drawers into the wall so she would have a straight path from the kitchen to the living room — the less to walk around, the better.
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“It was so stressful because we had so much to do for Mum to be comfortable living here,” says Jen. They bought kitchen cabinets, floors, bathroom tiles, and furniture that would accommodate Marjorie with a walker, and a stacking washer dryer so she could be more self-sufficient.
Jen didn’t know at the time that the renovation costs would skyrocket to more than $30,000.
Paying for Renovations with Home Equity
“Luckily Dan did most of the work, but I had to use my line of credit to pay for the materials,” says Jen. “Luckily it worked out, as we didn’t think there was time to get financial advice.”
Wadad Chaar, Mobile Mortgage Specialist at RBC Royal Bank, says besides a line of credit, another option to consider is using the equity you have built in your home through a home equity line of credit (HELOC).
“That would have given her a lower interest rate because it’s a secured line of credit against the property that can be segmented into a mortgage,” she explains. Using home equity may be an effective way to lower borrowing costs. “And it’s flexible for future borrowing needs — you can then pay it down quickly with additional lump sum payments or keep it in your line of credit and have the flexibility to pay it off anytime.”
A HELOC doesn’t have to be secured at the start of a renovation, in fact, you may take out a HELOC at any point. Chaar’s clients often use home equity to finance a renovation, invest in a second property or pay off debts. “Some people refinance to assist purchasing a home for their parents or kids,” she says.
2. Students Having to Return Home
The dining room table used to double as my work space, but with the kids home I couldn't concentrate there, and they were in the background on video conference calls.
Val Lawton
As time went on and schools and universities remained closed, the Lawtons needed to make space for the kids’ stuff and to adapt to working from home. “We pretty much had to change our lifestyle,” Val says.
Robb has similar issues. “I used to dump my work in our common area but now there wasn’t any room. I bought a green screen: you can project an image on it and it’s a background for video calls rather than seeing all the clutter and the kids walking by.”
“We want to make our home more welcoming and have more space for them regardless,” Val adds. “That would require borrowing money, so a call to our bank may be sooner rather than later.”
Unexpected changes mean you want to renovate your home?
Smart Reno by RBC Ventures helps people find and compare qualified and available contractors for their renovation projects.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
