Saturday, June 6, 2015
Friday, December 12, 2014
Friday, October 10, 2014
Saturday, September 13, 2014
Which reno projects reap the richest rewards (and what does your neighbor's home have to do with it)?
You've just finished renovating your home from top to bottom. That means attic, basement, and every square inch of living space in between.
Okay, so your place now looks like the Palace of Versailles - but you also had about as much work done to it as the Queen did Buckingham Palace (and that little project just about bankrupt her!).
Sure, some of those expenses may well pay for themselves come resale time, but not all. You knew that - and that’s why you shied away from the skylight installation, the pool, and the new asphalt driveway.
But there’s more to it than that.
The Appraisal Institute of Canada compiles a report each year based on findings from a survey of its members to determine which reno projects offer the highest return on investment.
Perhaps the most significant findings from the survey are:
- The expense you put forth for the project must be relative to the price of your home (for instance, a $30,000 improvement doesn’t belong in a $100,000 property).
- The projects you undertake mustn't separate the home from other homes in the neighborhood too drastically.
- You’ll recover a higher return from renovations if the value of your home is below the neighborhood average; those same renovations will yield significantly less if the value of your home exceeds the average.
- The smartest improvements reside in a kitchen update worthy of the Duchess of Cambridge, a remodeled bathroom, and an interior paint job. These upgrades are the only ones that could potentially pay entirely for themselves. That roof replacement and new furnace or heating system might encourage up to 80 percent in recovered funds. Doors, windows, and a new deck may fetch back 75 percent.
- But your wood fence, interlocking paving stones (cute - but not all that investment-smart), and unnecessary landscaping costs (a bush shaped like a deer - really?), could end up setting you back 75 percent in unrecovered costs.
These findings might be of particular note if you’re planning to spend an average of $21,000 or more on your home in the year following the purchase of your house - and many Canadians do, according to data by Canada Mortgage and Housing Corporation.
Why so much? One possible reason: Home renovations are in vogue. Of course, all you’d have to do is take one glance at television programming these days to arrive at that conclusion.
Where there’s smoke...
A recent Maclean's article that highlights the "dark side" of home renovations certainly supports the observation that home renovations are sweeping the nation in ever-growing numbers.
Shows like Property Brothers, Love it or List it, and Holmes on Homes are just a few that provide evidence of the growing trend: Home renovations have climbed 7 percent every single year since 2003. Roughly half that growth might be due to a “white-hot housing market,” according to Maclean’s. Economists have even given it its own name: the Wealth Effect.
For every $1 increase in wealth a homeowner makes due to real estate appreciation, notes TD, the homeowner doles out a nickel on home improvements. A Houzz survey further found that where just 14 percent of Canadians said they would take out a line of credit to finance their home renovation costs in 2013, a whopping 34 percent said the same a year later.
Okay, we get it - home remodeling is the new black. Still, don't get sucked into a black hole of debt over it.
One final tip
Keep your eyes on the prize and don’t get too consumed with the idea of transforming your home from top to bottom. Take it one project at a time and always keep the cost-to-value ratio in mind. Follow that advice and you’ll have both your palace and your bankbook looking tip-top in no time.
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Friday, September 12, 2014
Thursday, September 11, 2014
About 20 percent of households who would benefit from refinancing are not doing it — and they could be losing out on lessening their mortgage payments by thousands of dollars over the life of the loan, according to a new report from the National Bureau of Economic Research.
"Despite the large stakes, anecdotal evidence suggests that many households may fail to refinance when they otherwise should," according to the report. "Failing to refinance is puzzling due to the large financial incentives involved."In analyzing a large random sample of outstanding mortgages from December 2010, researchers found that the median household could save $160 per month over the remaining life of the loan, amounting to a total savings of about $11,500.
The report found that borrowers may fail to refinance because they are unable to calculate the full financial benefit to them, they fail to see the benefits over time, or the high amount of upfront costs may deter them.
"Our results suggest the presence of information barriers regarding the potential benefits and costs of refinancing," according to the NBER report. "Expanding and developing partnerships with certified housing counseling agencies to offer more targeted and in-depth workshops and counseling surrounding the refinancing decision is a potential direction for policy to alleviate these barriers for the population most in need of financial education."