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Samantha Ritchie's family renovated the bedroom for their two daughters during the COVID-19 lockdown.Cole Burston/The Globe and Mail

Samantha Ritchie’s wartime house in east Hamilton, Ont., began to feel cramped after she and her husband had children. Her two daughters shared a room with no closet – a small, chaotic space constantly strewn with clothing.

Ms. Ritchie and her family had wanted more space for a while, but spending so much time at home during COVID-19 lockdowns drove the point home hard. “The kids doing remote learning was definitely a key factor,” she says. “They needed their own room to have their own learning space.”

She and her husband briefly considered buying a new house, but skyrocketing real estate prices meant they wouldn’t be able to get the amount of space they wanted in the city. Adding a second floor was also out of their budget, so they chose to gut the main floor, creating an open-concept kitchen and living area, while moving their bedroom to the finished basement to allow the girls to each have their own room.

Ms. Ritchie says the work will put the family $200,000 further in debt, which they added to their mortgage when they renewed it in February. That more than doubles what they owe to about $380,000. Still, she feels the renovations will be worth it once completed.

Ms. Ritchie is not alone in taking on debt to make her home more comfortable since the start of the pandemic. Borrowing through home-equity lines of credit (HELOC) has increased dramatically over the past two years.

Equifax Canada says the volume of new HELOCs increased by 56.7 per cent from Q2 2020 to a year later. In just one month earlier this year (between June and July), HELOC debt in Canada rose by $1.11-billion, to a total of $226.6-billion, according to Better Dwelling, a data-focused housing news site.

Olayinka Brimoh, a certified financial planner and chartered investment manager in Winnipeg, says he’s seeing two categories of upgrades: those meant to make the space more functional for those spending more time at home, such as home offices; and those meant to make it more enjoyable, such as decks, pools and hot tubs – items that, before COVID-19, were not in wide demand due to the time and money required to maintain them.

Mr. Brimoh says the wisdom of taking on debt for a renovation strongly depends on an individual’s circumstance. For instance, if the person is downsizing and wants to fix up the property to be sold, it’s fairly certain they will be able to pay off the debt with the sale.

For someone who’s insistent on a reno that may not add value – such as a pool – Mr. Brimoh says he encourages them to consider staying in the home a bit longer so they are able to enjoy the addition, as the value may not be reflected in the sale price. That said, the aspects of a home that add value are also shifting along with our changing habits, says Hamilton realtor Reisha Dass.

“I can’t tell you how often I have buyers looking for pools,” says Ms. Dass, who was having a pool installed at her own home when she spoke to The Globe and Mail. She says lately she will get as much interest on a house for sale with a pool or hot tub as one with an updated kitchen and bathroom – items that drew the most interest by far in prepandemic times. Before, “when you had a house with a pool, it was a niche item … The upkeep didn’t make sense for people. Now, it’s so desirable.”

Financial planner Mr. Brimoh says he’s been encouraging his clients to make budgeting changes that allow them to more aggressively pay off debt in advance of an anticipated rate hike.

A CIBC Economics report released Nov. 4 says about $350-billion in mortgages will be affected by changing rates in 2022. For those with variable-rate mortgages, that means less money from each payment is going to the principal, with more going toward interest.

Mr. Brimoh says while many are using cash accumulated from months of pandemic-inspired spending-pattern changes, he’s seen many people borrowing for such renos as well – or even drawing from their retirement savings. “They’re assuming their house will keep rising in value,” he says, “but you don’t know when you will be selling, or if there will be circumstances where you’re forced to sell your home.”

He also advises borrowers to get fixed rates now before they start rising. That’s what Ms. Ritchie plans to do. The key to managing the debt, she believes, will be to watch interest rates closely, so she and her husband can convert their variable-rate mortgage to a fixed rate before an expected hike.

“It was a whole percentage of difference [between] variable or fixed,” she says, adding that even if they only keep the variable rate for a year, that’s less money spent on interest that can be applied to their principal.

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