Home renovation: from financing to insurance
September 18, 2020
Two words. Home renovation. While saying the words out loud is simple enough, the process… well, isn’t. (Even if the reality TV shows make them seem like a piece of cake).
As a credit union, we can be a big part of making your home renovation project easier, as many members come to us to seek out financing. Once the project is finished, you’ll also want to visit a local insurance broker to make sure the value of your home is still covered under your current policy.
That’s where our friends at Brio Insurance come in. They have a lot of the same values as Sunova and provide expert and friendly advice when it comes to your home’s insurance checkup.
While this blog post isn’t about the actual project itself, we’re going to talk about two major parts:
- Financing your home renovation project
- Making sure you have the right insurance by the end of it. (Again, that’s where Brio Insurance comes in).
Loan or line of credit for your home renovation project
For home renovation projects, the most popular route is the line of credit. A home renovation line of credit won’t have set payments, but you do need to at least pay back the interest on what you’ve spent each month. As you pay off the balance of the line of credit, it becomes available to use again – much like a credit card. This can be a better option than a loan, especially if you think there will be more projects you may want to complete down the road.
Another option is a home renovation loan, which will have principal and interest payments over a set period of time. Once the loan is fully repaid, it would be closed.
Ultimately the decision is up to you, but we highly recommend speaking to a Sunova lending associate who can help determine which option makes the most sense for your specific situation.
The application process
Let’s take this step-by-step.
We would start by collecting information such as: employment information, income, assets (anything you own), and liabilities (anything you owe).
For a home insurance loan or line of credit, we would use your home as collateral on the loan which means we require that the property taxes and fire insurance are up to date.
Costs + renovation plans
Next, we need to know an idea of the costs and the type of projects being done completed with the loan or line of credit. You will need to obtain quotes from contractors or price out the cost of materials if you are doing the work yourself. If you are adding an addition to your home or building a garage, we will require the building plans.
Pre-approval + appraisal
In order to be pre-approved, your Sunova lender will review your debt servicing ratio (payments vs. income), credit and a few other factors too. Once you have been pre-approved, we will also determine if a property appraisal is required. (Most times, it is).
Once the appraisal comes back and all looks good on our end, the loan or line of credit will be approved. Yay! Next, our team would prepare documents for you to sign. After the work is completed and depending on the scale of the renovations, we may require a second appraisal to confirm the work has been 100% completed. Lastly, we may request that you provide copies of all receipts and invoices so make sure to keep those handy!
Updating your insurance with Brio Insurance
Once your home renovation project is complete, you’ll want to visit your home insurance provider to make sure the new value is covered under your policy. Our friends from Brio Insurance graciously provided the following information.
Here’s what you need to know.
Insurance clients typically fall under one of three categories: first time insured, currently have coverage, or have a gap in their coverage. For this scenario, we will assume the client currently has coverage or is seeking out a new insurance provider.
The information required for any home insurance policy
In preparation for your visit, you’ll want to know the following information. (Don’t worry, it may seem like a lot, but Brio Insurance property insurance specialists can help make the information gathering process a breeze).
- Date of birth
- Phone number
- Mailing address and location address
- Email address
- Year built
- Style of building (bungalow, two-story, split level, bi-level, high rise, low rise, townhouse, etc.)
- Square footage of the entire dwelling
- Number of families living in the home
- Overall construction quality and quality of finishings (average, above average, custom, etc.)
- Is there a basement?
- Square footage of the basement
- Type of basement (finished, partially finished, unfinished)
- If there is no basement, is there a crawlspace?
- Additional structures
- Attached or detached garage
- Interior and exterior details
- Number of bathrooms
- Number of fireplaces and type of fireplaces (wood, gas, electric, etc.)
- Construction type (wood frame, steel frame, timber frame, etc.)
- Fire protection: distance from fire hydrant and responding fire hall
- Exterior siding
- Is there a backwater valve or sump pump?
- Is the property alarmed for burglary?
- Year of last update
- Roof type (asphalt, fibre, metal, wood, etc.)
- Plumbing (% of copper, PVC, PEX, galvanized, cast iron, etc.)
- Electrical (% of copper, aluminum, knob and tube, etc.)
- Heating (gas furnace, electric furnace, boiler, baseboard, heat pump, wood boiler, etc.)
- Water tank / water heater
- Current insurance (if applicable) along with policy number and years continuously insured and renewal date
- Any claims made in the last 10 years and type of claim along with approximate payout
- Information on any cancelled or denied insurance in the past five years
- Information on any applicable gaps in coverage
- Mortgage details (name of institution and address)
- Lawyer name and contact information
What to bring to your meeting after completing a major home renovation project (and some important tips you’ll want to keep in mind)
The following is a list of things to bring to your meeting:
- Copy of your previous / current policy (if applicable)
- A copy of the home inspection (if applicable)
Tip time! Make sure to keep the following in mind when thinking about insurance.
Brio Insurance highly recommends you don’t wait until the last minute to talk about coverage for your home. Like most important things in life, waiting to the last minute may not always be the best decision.
If the type of work you did on your house only includes things like adding a fresh coat of paint, your insurance specialist probably doesn’t need to know, as this would fall under general maintenance / upkeep.
If you are living in your home while the renovation is being completed, your insurance specialist typically doesn’t need to be aware until the work is finished. However, if the house is being gutted and you require temporary lodging elsewhere, they will need to look at changing the house to ‘vacant’ and updating your premium.
If you are hiring a contractor, it would be in your best interest to make sure they have their own insurance. Most reputable contractors will have but it never hurts to ask!
If you are acting as the general contractor, then liability coverage is usually required. Liability can generally be extended for a flat fee.
If you’re ever unsure about home insurance, your local Brio Insurance branch is just a phone call or email away. They recommend always reaching out as specific scenarios may require special types of coverage.