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Preparing for a major home renovation is like making any other financial decision – it requires a plan with realistic expectations and built-in contingencies just in case things don't go exactly as planned, experts say.

"You need to plan and you should also probably plan for things turning out to be more expensive than you expect," said Richard Goyder, vice-president of personal lending at the Royal Bank of Canada.

"No project survives first contact with reality … you start ripping things out and discover problems you didn't know about."

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Fardid Biglar, a partner at Toronto firm BiglarKinyan Design, says homeowners need to be honest about what they want to do and what they can afford.

"It is important to talk about what your expectations are and keep the budget in mind as well when you are talking about that," Mr. Biglar said.

A good designer or architect, he says, will be able to determine whether a budget is sufficient or not and explain what can be accomplished within a set amount.

In addition to routine reference checks, Mr. Biglar says homeowners should try to see previous work done by any potential designer or contractor and compare it with their own expectations, as one person's idea of what constitutes a "high-end" renovation may vary greatly from another's.

"It is important to see someone's project and make sure the work that they do – that they claim to be high-end for example – is in line with their expectations," he says.

Mr. Biglar says renovating a house can become like a full-time job for a homeowner, as the number of decisions that need to be made pile up, so having a good architect, designer or contractor is key.

RBC's Mr. Goyder says a home equity line of credit is often the cheapest form of borrowing to finance a renovation, but unsecured lines of credit and personal loans may also considered.

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But whatever type of borrowing, he says it's important to have a plan to repay it and have the cash flow to make that happen. With the Bank of Canada eyeing the possibility of raising rates, the prime rate at the country's big banks could also rise, taking with them the rates charged to lines of credit.

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