|6 Months||3.10 %|
|1 Year||2.99 %|
|2 Years||3.24 %|
|3 Years||3.09 %|
|4 Years||3.34 %|
|5 Years||3.24 %|
|7 Years||3.34 %|
|10 Years||3.79 %|
|Current Prime||3.70 %|
|5 Year Variable||2.65 %|
By Gail Johnson | Pay Day – Wed, 4 Mar, 2015
When Cathie Hurlburt and her husband were contemplating whether to renovate their home or buy something bigger to accommodate their growing family, the Vancouver certified financial planner “did the math 90 times”. The result favoured renovating every time.
The cost to move can be exorbitant, especially in pricey markets like Vancouver and Toronto. By the time realtor commissions (typically 7 per cent on the first $100,000 and 2-3 per cent on the balance of the purchase price in B.C.) property-transfer taxes, legal fees, and moving expenses are factored in, you’re easily looking at $50,000 in costs. That’s not including any potential mortgage penalties.
“You might as well be rolling up 20s and lighting them on fire,” says Hurlburt, a partner at Integrated Planning Group. “And I have not had a client move into a new house and not drop another $5,000 on something: a new fridge or new carpeting or new towel racks or — ‘the car doesn’t actually fit in the garage.’”
Renovating is an option that a lot of Canadians are choosing over buying when they need or want a new, improved or bigger space. But there are pros and cons to either option.
For Hurlburt, staying also made sense because the family liked their lot and their neighbourhood.
The money to move
Nancie McLeod, a realtor, designer, and LEED-accredited professional in Toronto, points out that selling and buying anew can come with tons of other costs: preparing the home to sell often involves repairs, minor renovations, junk removal, yard clean up, painting, cleaning, window washing and possibly staging.
“Staging is sometimes paid for by quality realtors but more often than not the owner pays,” McLeod says. “I have heard $10,000 thrown out there. Painting is the one cost that is highly recommend as you get a big return for it. A small two-bedroom house can run about $3,000. A larger four-bedroom can run to $10,000. The average is about $5,000.”
Buying also entails a fee for a home inspection.
Then there is the cost of people’s time.
“In the undersupply conditions of today’s market, finding a new home can take a very long time,” McLeod says. “I have heard up to a year in some cases. And it can cost you more: blowing your brains out, aka overpaying for a property as your bidding-war patience dwindles.”
Think first before you renovate
Renovating could involve removing or locating walls, refinishing the basement, or putting an extension out the back. It has its own disadvantages.
“Finding a good designer, architect, or builder can be a challenge,” McLeod says. “They are busy, so you may not get things started as soon as you would like. Once you get underway, there can be delays due to weather, discontinued materials, and the unpredictability of, say, opening up a wall. Permits and dealing with city officials can be time-consuming and costly.
“Sometimes moving out for the renovations is necessary,” she adds. “A year is very common. This is approximately $2,000 per month minimum.”
And you can bet you’ll spend more than you anticipate.
“Nobody renovates on budget. Absolutely nobody,” Hurlburt says. Her own reno went over by about 10 per cent; she’s seen people spend as much as $100,000 more than they budgeted for.
Overspending is exacerbated by low interest rates and the surge in home-design publications, websites and TV shows.
“Debt is cheap right now,” Hurlburt says. “Everyone thinks they’re a do-it-yourself guy, and Home and Garden TV has only made everybody’s obsession with having the perfect house worse.
“Ask yourself: What’s your reno risk?’ If it’s an old house, there may be stuff you don’t know about when you open the walls or that’s not up to code or has a safety issue,” she says. “You may discover you need to redo wiring or replace pipes are corroding. What causes the budget to go way offside is poor planning and upselling by trades.”
One of the most expensive phrases McLeod hears is “while we are at it”. “This can add to the cost of renovations. Hand on heart, I tell clients to double the budget and double the time frame.”
A simpler strategy could be to stay put and rearrange what you’ve got.
“We don’t always use our space as efficiently as we could” McLeod says. “Rearranging existing furniture or replacing some not-so -useful pieces with multipurpose pieces can do the trick, as can thinking outside the box a little. For example, Dad seems to work at the dining room table on his lap top instead of in his office. An attractive storage in the hall could house his files and equipment, and then you’ve got a vacant room for the baby on the way.”
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