For many homeowners, it’s first comes love, then comes mortgage — and then comes forking over even more thousands of your hard-earned dollars to replace the lime-green tile in the bathroom that seemed so charming when you did your first walk-through.
Or perhaps it’s a few years, or even a decade, into your home, and you’re starting to see your basement in a different light. Maybe your parents need help and want to downsize from your childhood home, or you’re simply looking for an income opportunity while offering up an affordable rental unit in a city that’s sorely in need of them.
Whatever it is, life happens, and it happens to houses just as much as it does to people. A new InsuranceHotline.com survey that polled homeowners across Ontario found that 45% of homeowners were planning home renovations or remodels this year.
Most of the renovations were cosmetic upgrades, but others included preparations to move extended family into the house and plans to rent out a legal unit.
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How often do people get renovations done on their house?
Generally, how often people get renovations done depends on the age of the house when it was first bought, and the individual style choices of the homeowner, says Jose Da Cunha, the owner-operator of JRC Trim Carpentry.
In the survey, 66% of the respondents who were planning renovations reported doing so for cosmetic reasons.
Cosmetic renovations – like retiling, trims, new cabinetry — typically happen every 15 to 20 years. That’s around the time that Da Cunha says that appliances last or trends go out of style.
However, there are exceptions; say, if a homeowner is renovating to sell, or they’ve just moved in.
“If they’re moving into an older house, chances are they’re going to renovate within five years,” he says. “Usually when they’re looking, they might say, ‘Well, the kitchen’s dated, but we could do that in two years.”
Others will go out of their way to look for a home that already fits their needs or opt to buy a new construction home.
“Some people buy new builds and they’ll never put a cent into renovating their house until the day they die,” he adds.
There’s a financial incentive to some renovations to existing homes, too – Kaylee Boisvert, a financial advisor with Raymond James Wealth Management, has recently had clients coming to her with plans for energy efficient upgrades, such as door and window replacements, which come with some government grants.
She also says that some homeowners renovate to save themselves the hassle and expense of moving.
“With the high mortgage rates, people are less inclined to up and move houses and instead would rather upgrade and make those fixes, building that dream kitchen they always wanted in their own house,” she says.
Related: 3 ways to value your home renovations
Larger renovations to make space for multigenerational living
Multigenerational households are a staple for many immigrant communities in Canada – one in ten households in Canada have three or more generations, according to 2021 data from StatsCan. However, a tough housing market and soaring costs of living have turned more people onto this living arrangement.
Among respondents who were planning on renovating this year, 8% were planning on enabling extended family to live with them.
Over the past few years, this trend has been reflected in new developments around Ontario – perhaps buoyed by increasing immigration to the province, or simply by forward-thinking homeowners.
Most of Da Cunha’s jobs are homes in newer subdivisions in Durham Region and around the GTA. He says that typically, if a homeowner wants to rent out a unit in their house or make a private space for their family members, all they need to do is add walls, put in a kitchen if necessary, and divide the front entrance.
Newer homes tend to be more open concept, too. This makes it relatively easy for homeowners to expand kitchens and create new space without having to knock down too many walls.
Older homes are a different story. Back in 1960, the average above-grade living area of a single-detached home in Ontario was 1,240 square feet. By 2017, the average was nearly doubled, at 2,380 square feet. Not only are people in older homes limited by space, they’re also limited by design.
“[Older homes are] kind of closed off, with doors everywhere,” says Da Cunha. “You’re getting into a lot of work; it’s taking down walls, and then you’ve got to carry the load down to the basement. And if the basement is not finished, there’s going to be some destruction down there. So, it does snowball from there.”
Most of the time, he says, a family will decide to just move a family member into a room in the house and try to upgrade the common areas.
“But, again, with older houses, you only have so much square footage to add a new bathroom without giving up the space of a bedroom or a closet,” he adds.
Learn more: Should you increase your home insurance when your parents move in?
Turning extra space into rental income
Despite having less square footage, older homes – at least in Ontario – tend to house more secondary suites, or basement rentals. According to a CMHC report from 2021, 60% of secondary units in Ontario were in homes built before 1970, with higher concentrations of secondary units in homes built pre-1920, and between 1950 and 1959.
There are a few reasons for this. Older homes of this era are clustered around downtown areas of older cities like Toronto and Hamilton, making them highly desirable to renters. In fact, one in six single detached homes in Toronto has a secondary unit, by far the most of any other municipality in Ontario.
Newer and larger homes are typically located in suburbs where a car might be necessary; while other municipalities, like Windsor, have stricter restrictions on basement units due to flooding risks.
Another reason is that to make up for less above-grade square footage, many of these homes already have basements.
“If you’re going with an older home in Toronto, you’re working with a shell,” says Da Cunha.
“But a good majority of the houses are already semi-set up for that, with almost a separate entrance you can cut off and dedicate to a basement tenant. “
The CMHC report also found that most single-storey homes in Ontario were built with separate basement entrances.
In our survey, 6% of people undertaking renovations were planning to rent out a unit in their home.
More people setting down savings for their renos
Planning a renovation is one thing. Paying for it is quite another – especially with the higher cost of borrowing.
The InsuranceHotline.com survey found that 58% of people planning renovations would be paying with their savings, while 22% were planning on paying from an existing line of credit (like a HELOC).
This is consistent with what Boisvert is seeing with her clients.
“I’m having conversations with clients who are buying cars outright right now, versus any kind of leasing or financing,” she says. “They just can’t stomach these rates that we’re seeing now.”
The pandemic – with its travel lockdowns and closed restaurants – also helped fast-pass some savings.
“I saw a lot more clients making deposits [during the pandemic], and now I see more people withdrawing it,” she says. “So, I think this is the goal – they put a lot of savings aside, and now they’re spending it.”
Whether you cover a renovation with savings also depends on the scale of your renovation and what you’re willing to compromise on.
“If I’m doing crown molding it’s a smaller-budget job, so chances are [my customers] do have the cash for it,” says Da Cunha. “The larger scope ones, it depends on the people. If they’ve been planning their reno for a long time [they might have saved up money for it], or maybe they’re thinking, ‘Well, it’s going to cost more in interest, we’re just not going to get high-end appliances right now’ and they’ll swap those out down the line.”
(For reference, minor cosmetic renovations typically cost $10,000 while major renovations can run up to $50,000 or more, depending on the size of the job).
Where people might be in a better position to spend more and tap into their mortgage equity, says Boisvert, would be on renovations that may yield some income, like rental units.
“So, if you’re renovating the space, knowing that they’re going to be able to rent it out, maybe you’re more inclined to take on some debt for that, knowing that it’s going to generate an actual income,” adds Boisvert.
Homeowners can also minimize their debt by taking advantage of the incentives offered by multiple levels of government to rent out a secondary unit.
Peel Region, for example, offers homeowners a forgivable loan of $20,000 to upgrade and legalize a unit in their home for rental purposes, and an additional $10,000 if they rent it to a tenant referred by the municipality. Collingwood has a similar program — $30,000 in forgivable loans to create an affordable unit in your home, plus an extra $5,000 grant for participants. The province of Ontario also offers up to $25,000 to low- to moderate-income homeowners to create a secondary suite as well.
Read more: Does home insurance cover secondary suites?
Much like getting married, renovating your home is often an expensive, disruptive, and logistical nightmare. But when planned carefully and with the best intentions, it can also set the course to a new, exciting long-term future.
(Or it could lead straight to a financially crippling divorce. La vie c’est fou!)
