Thinking about building a home or renovating your existing home? Overwhelmed by the abundance of financing options available to fund your project? The odds are that you are experiencing the same confusion and anxiety that thousands of Canadians experience each year when looking to complete a home customization project.

For most, the first option that comes to mind when thinking about financing is to approach the bank. Low interest rates and security are usually the main goal behind applying to your bank to finance your dream home. What many fail to realize is that these institutions have very strict lending standards, complicated draw schedules and high penalties for refinancing as a result of cost overruns.

Draw schedules are the most concerning item on this list. Banks require certain percentages of the project work to be completed before they fund the next phase of the project. As the principal of Sensus Design & Build, I have seen many people fall into an “upgrading trap” that can cause issues with financing. The trouble starts when clients increase their budget above the original cost schedule because of material upgrades. They are then stuck not having enough funds to complete their project, as the bank’s progress requirement has not been met.

At this point, I have had clients come to us to bail them out. We help by connecting them with a lender through whom they can attain financing. The result of a poorly planned home customization endeavour can result in a high stakes game for all parties involved in the project, regardless of the final goal.

You can avoid an unsettling financial situation by taking advantage of the services of lenders who specialize in construction financing, alternative investments and trusts. However, these lenders often require higher fees and interest rates. Regardless of the short term rate increase, these lenders prove to be a valuable resource if you plan to complete the construction process quickly and then refinance with a traditional mortgage arrangement through a larger bank.

Design and build firms like mine include financing advice and lot acquisition services as part of the pre-construction phase. Regardless, the planning phase should include a design and build team as they can advise from the outset of the projects fruition to help you create an inclusive plan, helping you avoid the trap of running out of funds and having to access additional financing to complete your renovation.

Thousands of Canadians get lost in this financial jungle every year, forcing them to pay unnecessary penalties resulting from a poorly built financial plan. During the planning stage, by including your design and build team, your home customization experience should be enjoyable and as worry-free as possible. Stay informed and involved throughout the entire process so that there are no financial surprises that can turn your dream home renovation into a nightmare.