5 Tips on Saving & Paying for Your Reno
Posted on: 2018-09-01
If you own a property, you may dream about some day renovating certain parts– or even the whole thing! The newer your home, the less likely you are to prioritize saving and preparing for a reno. This is fine while everything is in peak condition, but it is wise to familiarize oneself with the process of saving and paying for a major investment. D.I.Y. culture and discount material can be tempting, but always be sure to have your financial affairs in order before taking on a major project.
1. Budget it out
If you have heard it once, you have heard it a million times: “Make a budget.” No matter how much money you have or how you plan to use it, you are risking disaster without an itemized list of expected costs. Before you make any purchases or sign any contracts, prepare a budget for each phase of your renovation– ranging from the bare minimum cost to the worst case scenario. Most importantly, once you have a budget you must stick to it through the project!
2. Finance or save
Like many other major financial decisions, most people have the option to save up, borrow credit or some combination of both. Spending your savings on a renovation is financially sound, but it can leave you vulnerable to unexpected costs. There are trustworthy financing options that cater to homeowners, but there are also predatory money lenders. Each scenario has their own advantages and disadvantages, so only you can decide what works best for your life.
3. Interest rates vs term length
Whether you are borrowing or saving, you must understand the relationship between interest rates and the term length of financial agreements. Generally the longer you are given to pay back a loan or line of credit, less interest will be charged per month or year (though the total interest paid may be higher). Conversely when saving: the longer you invest your money without accessing it, your investment will earn back a higher percentage of the principal.
4. Beware discounts
As you budget, save, borrow or otherwise prepare your finances for a major renovation, it can be tempting to buy up discounted materials for your future plans. Unfortunately this decision is often more harmful than helpful for a variety of reasons. Firstly, items are often discounted because they have been discontinued– you may be halfway through your reno before realizing you do not have enough material, but it is no longer available! Secondly, tastes change as time goes on– when it comes time to renovate, you may not love your purchase as much as you once did.
5. Start when you’re ready.
Finally, never start a renovation before you feel ready to take on the entire project. If any part of your plan hinges on improvisation or playing it by ear, consider holding off until you review these aspects of your reno. False starts can be frustrating and expensive!
The five tips above are only a summary of the many ways you can be fiscally responsible before undergoing a renovation of any scope or size. If you have questions or concerns, feel free to contact the pros here at Parabola Developments today!