Finance your renovations to take care of your aging parents
In 2015, Canadians took a decisive step: the number of adults over the age of 65 is now greater than the number of children under 15 years old. With more than 16% seniors and a steady increase in their population, many Canadians find themselves in mid-life, with children at home and their parents who also need some level of care.
Perhaps you are in this situation yourself and have you decided that moving in with your parents might be the best option for everyone. The benefits of a combined lifestyle can be:
- Reductions of expenses. Your parents may be able to save money on their rent or mortgage payments. They can also contribute to mortgage payments, shared utility costs and grocery bills. Win-win for everyone.
- Relocation easier. When family members are scattered everywhere, the decision to move can be a long and difficult process. On the other hand, when you or your parents already have a home that you can share, the problems of buying a house or renting a property become simpler.
- Medical assistance. Unfortunately, aging can often mean more doctor appointments, surgeries, mobility or vision problems, and an increased need for personal care. Having your parent at home can reassure both of you, as you may be present in case of an injury or illness and help take care of it or during a doctor’s consultation.
So you have decided to go ahead. Either you move or your parents move.
The problem is that the house needs renovations to accommodate everyone
What are your options?
- Additional housing or inter-generational suite. A completely separate unit attached to the original family home can provide privacy and independence to your family and parents, especially if they are still independent and caring for themselves. Also referred to as a garden suite or secondary suite, these units have partial or full kitchens, full baths, bedrooms and living areas. By thinking proactively, you may want to consider building everything on one level.
- Renovations for accessibility. If your parents need more care or less space, or if you can not afford to add more, you may be able to renovate to make room for them. You may only need to change the layout, combine rooms, or make changes that make accessibility easier. Consider future health and mobility issues. Your parents may be walking now, but a walker or wheelchair may require wider doors and hallways, as well as lower cabinets. Grab bars, balustrades, special baths and accessories are also options to consider.
In either case, you will have a lot of planning to do. Get the proper permits because the fines can be substantial and the liability can be devastating in case of a problem. Consult your local building department for all requirements regarding fire separation, sound transmission classifications and septic installations (for rural properties).
If done properly, your upgrades may increase the value of your property. Unless you are highly qualified, hire a designer or architect and a contractor. Involve your parents in the process by allowing them to contribute to the design process and work on the project, if possible.
Your budget will be extremely important. You do not want to stretch too much and you do not want to be stuck with an unfinished renovation. Be as specific as possible in the estimates. Any builder will tell you that there will be unexpected costs. Design changes, forgotten items, and unexpected upgrades imply over-budgeting. If you add 10% more to your initial cost calculation, you will avoid unexpected costs.
Consider the following costs:
- • Initial construction plans and updated drawings
- • License application fee
- • Possible zoning changes
- • Contractor and labor costs
- • Building materials and supplies
- • Days without pay to meet contractors or work on the project
- • Financing and legal fees to fund renovations
Your budget will depend on the size of your renovations and the work you will do yourself. After determining the amount you will need, you will be able to choose the method of payment for the work.
You or your parents may have personal savings that you can draw on
That being the best option, most of us will have to find another solution. You can consider one or more of the following possibilities:
- Government grants. Your renovations may be eligible for funding through federal, provincial or municipal programs. As affordable housing is a recurring problem across the country, the federal and provincial governments are working together to invest in new rental housing and renovations to make existing housing more accessible, particularly where low income is a problem. The Affordable Housing Investment Program is one example. Provinces and territories are also working to fund affordable housing. In Ontario, for example, low- and moderate-income homeowners can apply for funding to help with urgent repairs, renovations and accessibility changes. You can do a Google search on “Ontario Renovates” and your county name to find information and funding requests. Check with your municipal offices for more information. Submit your application early as funding is limited and money is depleted.
- Credit card. If you plan on spending a small amount, credit cards may be the solution you need. On the other hand, be careful. If you need a balance, high interest rates make it an expensive option. The average credit card starts at an interest rate of about 19% and store-specific cards can reach 30%. If you can pay the balances immediately, the credit card rewards can be a bonus.
- Personal loan. A personal loan can easily be obtained when you meet the criteria and that interest rates are lower than those of credit cards. When you pay the loan, you no longer have access to the money. If you need more money, you will need to apply for another loan.
- Line of credit. This is a great option if your income allows you to repay it regularly. The amount you have borrowed will always be available at a reasonable rate, so you never need to reapply. Credit margins can be built into your regular bank accounts, allowing you to easily check balances and transfer money between accounts.
- Current increase of the mortgage. If you have equity in your home and a good credit rating, you can contact your bank or mortgage company for an increase in your loan. This option spreads your payment longer, at lower interest rates. Generally, you can claim up to 80% of the estimated value of your home. Unfortunately, if you are self-employed or your credit is poor, the mortgage rules are often stricter. In this case, you may need to contact a mortgage broker or private lender.
- Second mortgage. If you are unable to consolidate your renovation into your mortgage, you may be able to obtain a second mortgage through a broker. This additional loan, using your property as collateral, also spreads your payment over several years. You will pay more interest than a conventional mortgage because the second mortgagee takes more risk, but you will pay interest and principal at the same time.
- Private lender. You may know someone who wants to invest in your renovation. Alternatively, a mortgage broker can help you find a private lender willing to help you. Generally, in this situation, you make regular interest payments and the total amount of the loan is due at the end of a given period. Read and understand the full terms of the agreement and ask your lawyer to review the documentation. Once your project is complete, you may be able to consolidate the new loan into your existing mortgage. You can get up to 80% of the value of your home, based on an assessment of the home made by a company approved by the lender. Make sure you know the fees and penalties you will have to pay before making any changes to your current loan.
- No matter how you decide to finance your project, lenders will consider several factors. You will need to provide information on:
- • Your income, according to the current notice of assessment
- • the amount of debt you currently have
- • your credit score
- • the equity in your home
- • the value of your property
If your parents contribute financially, lenders can also take this into account
Before starting the project, it is wise to have a family discussion about how mortgage payments, renovation costs, utilities and other bills will be shared. This will also help in the early stages of planning and budgeting.
When your renovations are complete and your finances are well established, remember to apply for the corresponding tax breaks when you file your tax return. Talk to your accountant about credits and discounts that may be available in your province or territory. Here are some examples:
- Home Accessibility Tax Credit. If you make changes to your home to provide more accessible housing for a disabled person, you may be eligible for a portion of the cost when you report income taxes the following year. Eligible expenses may include permits, plans, construction materials, equipment rental and accessories.
- Ontario Home Renovation Tax Credit. You may be eligible to claim up to $ 10,000 if you are renovating your home to increase mobility and / or accessibility for someone over 65 years of age.
Planning renovations to share a home with your parents is a complex process. Whether you want to share costs, reduce geographic distance, or provide more care, you have many options to finance the work. When you take the time to budget responsibly and carefully consider all of your options, you’ll find solutions that will work for everyone involved.