What Is Your Home's Remaining Economic Life?

Centra Estimator Dave Warden from Kelowna, BC talks about renovations, windows, and how they affect your Remaining Economic Life.

I was having a discussion with a client a few weeks ago about the benefits of new windows in his home. During the conversation I mentioned that replacing his windows would increase his “Remaining Economic Life”. It was at this point he gave me that look. You know the one I'm talking about. The one that can only mean one of three things:

1. The person you are talking to has no idea what you are talking about.

2. The person you are talking to doesn't believe what you are talking about.

3. Elvis is standing behind you.

I quickly looked over my shoulder, checked that the coast was clear, and looked back at my client.

“You're trying to tell me new windows will make me live longer?”

“I wish,” I responded.

I then proceeded to tell him about Remaining Economic Life (REL) and how new windows could drastically change that.

When a new home is built it is given an economic life, depending on the type of construction, which can vary from superior to average. The typical economic life of a home is 60 years. This means that if you move in and do nothing at all to the home -- no repairs or maintenance -- it will last you about 60 years. When your home is appraised by the bank, they determine your home's effective age (i.e. the condition of your home) by looking at how much your home has depreciated and what work has been done. A 40-year old home like his, with the original roof, siding and windows, would be given a physical age of 35 years. Therefore, the house would have an REL of 25 years when subtracted from the original 60.

When you come to re-mortgage or re-finance, the term of your mortgage and borrowing power are restricted by the REL of your house. This means the maximum mortgage term this house would qualify for is 25 years.  Also, if you plan to sell your home, it would restrict the borrowing term of the new buyer.

It has been my experience that the single best investment (dollar for dollar return) in your home is a new roof or new windows.  These drastically lower the effective age, and in turn, drastically increase its Remaining Economic Life.

Will new windows make you live longer? No, unfortunately not. But they will increase the economic life of your home, and give you stronger financial stability regarding your largest capital asset.

If you would like to learn more about how windows can help your home's REL and curb appeal, I'd love to help you out. Feel free to email me at info@centra.ca.

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