When you’re contemplating smaller home renovation projects that can be financed out of cash flow or short term credit facilities such as lines of credit, personal term loans, or even credit cards, what you choose to renovate in your home or property is likely not going to have any bearing on any of these types of financing.
But for bigger projects where a construction mortgage or renovation loan needs to be acquired against the current and future value of the property, the actual things you choose to renovate can make a difference in the amount of funds you can acquire which can directly impact the scope of your renovation project.
With any type of construction loan, the lender will assess the current value of your home as well as the expected future value of your home once all the renovation work has been completed.
The increase in property value that results from a renovation project can directly impact the amount of money that can be borrowed for renovation purposes.
So while there is likely a personal ranking of renovation projects you are considering, you should also consider an economic ranking in order to potentially maximize the amount of home construction financing that can be at your disposal.
One way of getting a better idea as to what types of renovation projects can contribute the most incremental value to a home or property is to use a worksheet such as the one provided by the Appraisal Institute Of Canada for just such a purchase.
Here is a link to the tool … http://component.aicanada.ca/e/resourcecenter_renova_all.cfm
This tool or worksheet allows you to input cost estimates for different types of renovation projects and it in turn calculates the incremental value or ROI that your investment will potentially add to your project.
Just remember that this is a planning tool that provides information for reference that allows you to compare the relative value of one type of improvement or renovation over another. I would certainly only suggest that you use it a guide as results will vary from property to property.
That being said, it does give you a pretty good idea of what types of projects will directly increase the value of your property the most which will in turn potentially increase the amount of renovation financing you can raise from your property.
If you’re planning out a renovation project or are in the middle of one and need a renovation loan to start or finish the job, I suggest that you give me a call so I can quickly assess your requirements and provide relevant construction and renovation financing options for your consideration.