Should I borrow money to renovate?

House Made of ToolsI’ve talked before about good debt and bad debt. Typically, good debt is associated with some sort of security or asset (like a house) or is another kind of investment (education).

Usually, home renovations fall under the “good debt” category. You may be asking yourself though, is it really worth borrowing money to renovate?

The reality is, in a number of housing markets in Canada (Toronto and Vancouver) in particular, it’s simply not possible to jump your way up the property ladder because real estate prices are so high. That means that sometimes you need to buy a fixer-upper, because that’s what you can afford, or make changes to your residence that you’re in, because it costs too much to buy another one.

If you are going to borrow money to renovate your house, be warned though that there are renovations that are simply for your own taste or pleasure. There are also some that you can expect to recoup some if not most of your investment back when you do sell.

The kitchen

You’ve heard the saying “spend money to make money”? This is definitely true when it comes to your kitchen. The kitchen is the heart of any home, and as such will more obviously display flaws or age.

You don’t have to blow the bank though with high-end granite and custom cabinetry. If you can use the space plan you have with quality countertops (laminates have come a long way in the last several years, both in durability and design), you can have yourself a sleek spot. Consider re-painting or re-facing cabinet doors, and you’ve got a new kitchen for a fraction of the price.

The basement

Many people covet a finished basement, simply because it increases the liveable space in a home. It can be costly to fully finish a basement, but this is something that you can expect to get a good chunk of your money back on a resale.

If you can DIY part or all of this project, even better!

The deck

Adding a deck in the back will not only give you a place to host your BBQs, it will effectively increase the value of your home. A simple wood deck does the trick, and again, if you can DIY (or assemble some friends to help) it helps your bottom line!