BMO Bank of Montreal
TSX : BMO
NYSE : BMO

BMO Bank of Montreal

September 04, 2011 07:00 ET

Sweat Equity: BMO Study Shows Homeowners Borrowing Smartly

TORONTO, ONTARIO--(Marketwire - Sept. 4, 2011) - According to a recent study released by BMO Bank of Montreal, the vast majority of Canadians currently borrowing from the equity in their home are doing it smartly to improve their overall financial standing.

The survey, conducted by Leger Marketing, revealed that 74 per cent of Canadians are using their home equity to increase the value of their property through renovations or home upgrades as well as to pay down or consolidate more expensive debt (41 per cent and 33 per cent respectively). Furthermore, only six per cent are using it as a source for miscellaneous spending.

Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal, said that the numbers are encouraging and show that the message of responsible, smart borrowing is hitting home among Canadians.

"If you have a track record of taking an informed, disciplined and responsible approach to managing debt, a home equity product can be a flexible and cost-effective option," said Ms. Archdekin. "However, those that borrow to pay for impulse or leisure items should only do so within their means and seek advice to determine what lending tool is best suited to the type of purchase they are making."

Ms. Archdekin noted that BMO currently offers BMO Homeowner Readiline, which allows customers who own more than 20 per cent of their home to access up to 80 per cent of that equity when they need it for expenditures such as home upgrades or consolidation of more expensive debt, while reducing the cost of borrowing.

Renovations by the numbers

BMO Economics expects homeowners across Canada to increase their spending on home renovations by more than 4 per cent in 2011, slowing from the previous year's pace but still healthy.

To finance these renovations, a recent BMO survey showed that Canadians are avoiding taking on extra debt, with the majority relying on savings (57 per cent), followed by taking out a line of credit or a home equity loan (25 per cent).

"Using your personal savings as a means to make renovations is a great option, as you're not paying interest or taking on more debt in the process," added Ms. Archdekin.

BMO offers the following advice for Canadians considering home renovations:

  • Understand how a renovation will impact the value of your home by researching which renovations create increased value and are popular selling features.
  • Think long term when making financial decisions – whether you are using savings or borrowing to renovate, take the time to meet with a financial expert to ensure your renovation meets your long term financial objectives.
  • Expect the unexpected – be financially prepared for the unexpected such as a leaky roof, broken pipe or other course corrections that may occur during the project.
  • Get renovation quotes in writing and understand what guarantees they provide – for example; if the cost of the plumbing in your renovation is more work than expected, will the quote go up?

For more information, please visit www.bmo.com.

Contact Information