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How to Finance Renovations on your New Home

If you need to renovate your new home, there are innovative mortgage programs that can help you out. As seen in REW.ca

With house prices continually rising, sometimes the only home you can afford is a home that needs a bit of updating or needs renovations. But traditional financing can sometimes make these types of home unaffordable. That’s because you first have to come up with a down payment to qualify for a mortgage for the purchase price. Then as soon as you take possession, you have to qualify for some kind of home improvement loan. Not only is it difficult to qualify for two separate loans at the same time, it also makes buying more expensive.

Fapartment-renovations-17899498ortunately, there are innovative programs from mortgage insurers such
as CMHC and Genworth that are designed for just this purpose. These programs helps qualified homebuyers make their new home just right for them, by making customized improvements, immediately after taking possession of their new home. All this is done with one manageable mortgage and with as little as 5 per cent down.

The improvements to be made under such programs can’t include structural changes to the home. Some of the improvements allowed include:

  • Updating or renovating kitchen
  • Updating or renovating bathrooms
  • New flooring
  • New paint
  • Finishing or renovating basement
  • New patio or deck
  • New energy windows/doors
  • Addition of garage, etc.

Some of the parameters of the program include:

  • As low as 5 per cent down payment (conditions apply)
  • Depending on the insurer, you can go up to 20 per cent of the purchase price with a maximum of $40,000 or 10 per cent of the as-improved value
  • Owner-occupied properties only
  • Down payment is based on the as-improved value
  • Other conditions apply

For example, the CMHC Improvements program lets qualified buyers borrow up to 10 per cent of the post-renovation value of a house and use that money to cover the cost of renovations.

Let’s say the house’s purchase price is $400,000 and the renovations you have in mind would increase its value by $40,000. That means the post-renovation value would be $440,000 so you could borrow $40,000 to cover the renovations.

Let’s See the Monthly Savings:

Straight mortgage with $40,000 line of credit:

  • Purchase price $400,000
  • Down payment $20,000
  • Improvements using line of credit $40,000
  • $1,773.51* mortgage + line of credit $316.67** per month
  • Total monthly payments: $2,090.17*

Purchase Plus Improvements:

  • Purchase price $440,000
  • Down payment $22,000
  • Total monthly payments $1,857.52*
  • Improved cash flow and lower interest costs
  • Living in dream home

renovations_page

To qualify, you have to provide a quote from a contractor or suppliers at the time of submitting the application to the lender. Once insurer (CMHC or Genworth) and your lender approve the renovation amount, it’s then added to your mortgage loan. However, you don’t receive the funds until the renovation is complete and has been appraised or inspected. This usually means you will need a short-term line of credit or come up with the funds ahead of time.

The best option is to work with a mortgage expert, such as myself, who has partnered with renovators and suppliers to make this program even more attractive. The renovator and suppliers will take care of the financing for you until the project is finished. Once the work is complete the solicitor will pay them directly the cost of the renovation. You will be rest assured that there will be no cost overruns (unless due to unforeseen circumstances), hidden costs and that the job will be completed on time and on budget.

The good news is that Alisa Aragon from Your Mortgage Solutions Group has partnered with renovators and suppliers to make this program even more attractive. The renovator and suppliers will take care of the financing for you until the project is finished. Once the work is complete the solicitor will pay them directly the cost of the renovation. You will be rest assured that there will be no cost overruns (unless due to unforeseen circumstances), hidden costs and that the job will be completed on time and on budget.

To see whether this type of program can help you affordably improve your new house into the home of your dreams, talk to a mortgage expert and we will provide you with a no-charge analysis of your needs and financial situation.

* Mortgage based on 5 per cent down payment with a fixed rate of 2.59 per cent, closed for five years and 25-year amortization
** Line of credit based on interest rate of 9.25 per cent interest payments only
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How to select a Mortgage Expert for your renovation needs!

Money Matters: How to select a Mortgage Expert for your renovation needs!

As seen in Metro Vancouver Home Decor & Renovations.

Although many Mortgage Experts (including banks) offer only basic services, there are others that will analyze your entire financial requirements to develop a strategy to help you qualify for the right mortgage, using all their resources.

Mortgages for construction or renovations.

When you are looking for a construction or renovation renovations_pageloan you need to work with someone that understands the construction process and has extensive real estate experience. It is important they are going to be there to oversee the funding from the start to the end of the project to ensure the draws are paid on a timely manner and they are in constant contact with the lender throughout the project. There are different options to finance a renovation such as mortgage financing, home equity lines of credit, purchase/ refinance plus improvement programs, alternative lending and other non-banking solutions. Sometimes the client thinks that because of their long term relationship with their bank, they will get the best financing options. That’s not the case!

Before you engage the services of a Mortgage Expert.

As Mortgage & Leasing Experts, we know all the information the client provides is personal and confidential and we strongly recommend for the client to always verify the identification of the person they are going to work with. This can be achieved by doing the following:

  • Visit their web site and co101-a-helping-handnfirm the services they offer.
  • Ensure the Mortgage Expert works for a reputable company.
  • Verify that they have an active license and are registered with the government of BC (For verification click here and click under sub-brokers).
  • Confirm that the location of their office where they work.
  • Read testimonials from their clients on their web site.
  • Unless someone referred you to the Mortgage Expert, make an appointment to meet them in person before you give them any confidential information, this will give you peace of mind and you will know how this person will handle your personal information. It is important to meet the Mortgage Expert in person and that they don’t deal with you only via phone. Even though it might be more convenient.

From the initial contact, the client will realize the type of service the Mortgage Expert is going to provide. Remember this person is going to be a guide and support for obtaining the financing to purchase the greatest investments of their life.