Some would rather spend on a home than a fancy wedding

By Sylvia Shaw

Single women are changing the face of renovations in British Columbia as social trends such as delaying marriage, increasing divorce rates and better occupations have contributed to the burgeoning female home ownership market.

Interestingly, women are spending big on homes despite the challenge of a gender gap in earnings. In 1991, women aged 25-29 earned 20 percent less than men. By 2001, that gap only changed to 18 percent, according to a Statistics Canada report.

Still, women now account for 51 per cent of first-time home buyers and, for those who have never owned a home, 55 per cent said they plan to buy soon, in a survey done for Royal LePage Real Estate Services.

This survey also found that nearly a third of potential brides said they would forego a wedding reception to put a larger downpayment on their first home, compared to just 15 per cent of grooms.

“We’re seeing that our women clients are taking control of their finances, their careers and their own investments – real estate and renovations are no exception to this,” said Kim Arnold, a mortgage broker with Invis Mortgages in Vancouver.

With home buying comes home improvements, and Arnold notes that women should look closely at the options for financing their makeovers.

In Metro Vancouver, financing of a major renovation is often done by way of refinancing a current mortgage, taking built-up equity in the property and pulling it out to pay for the makeover, she said.

Another option is to take a credit line against the property, or even a second mortgage. The product chosen will be determined by the dollar amount required and the clients’ ability to repay. “ Most commonly, refinancing of a mortgage is the option chosen,” Arnold said, “Due to the increase in value of properties in B.C. over the past few years, many homeowners have built up equity faster than they expected, allowing them to feel comfortable with refinancing of the mortgage.”

Lenders may advance 75 per cent to 90 per cent of the equity in the home – the difference between the market value and the amount still owing on the mortgage – for home renovation loans. But there are even loans based on the potential increase in the home’s value, post renovations.

An example for women planning to buy and spruce up a “fixer upper” is to add the costs of renovations into the original mortgage. Known as “purchase plus improvements” financing, this type of mortgage covers the sale price of the home, plus any renovations that would increase the value of the property.

Of course, the homeowner must also have the resources to repay the renovation loan, and Arnold explained that, in some cases, women fail to add all of their income.

When determining how much they can afford, a single mother, for example, can count child support payments, or alimony, from their former spouse as income. Self-employed women can also take advantage of “stated income” mortgage products, she noted.

Vancouver journalist Brenda Bouw, author of Home Girl, the Single Woman’s Guide to Real Estate in Canada bought, fixed up and flipped three properties before she was 34. Her advice on financing renovations is pragmatic.

Bouw recommends a secured line of credit for mid-size renovations, because it offers a lower interest rate than a personal loan. Also, a line of credit can be open-ended, meaning that, as long as you make the payments, you don’t have to requalify for another loan, should you need to borrow more money.

“While there is typically no cost to open a secured line of credit, legal and appraisal fees usually apply,” Bouw said.

There should also be sufficient room in the financing to cover cost overruns, very common locally due to rising costs for materials and a chronic shortage of skilled tradespeople.

She recommends allowing a minimum of 10 per cent, and as much as 25 per cent, of the total renovation budget to cover budget overruns.

Something some women may overlook, Bouw adds, is the extra decorating cost, post-makeover. “Once you have a new bathroom, living room or kitchen, you will likely be tempted to decorate those rooms, so have the extra money set aside.”

Online resources aimed at women include the Mortgage Lounge at www.MortgageLounge.ca, which offers a large line-up of calculators, and information on buying a home, renovating and investing in real estate. 

Reprinted from: Home Makeover September/October 2007