Tuesday, August 26, 2014
Monday, August 11, 2014
Whether you’re purchasing a home or looking to refinance, determining a property’s value is an essential step in the mortgage application process. You can help by providing precise and accurate information about your property.
The value of a property is determined by a number of different criteria, each of which can influence how much your home is currently worth. These criteria range from the square footage and the age of your home, to its location, construction quality, architectural features and even the number of bathrooms.
It’s important to remember that a property valuation is not a fixed or permanent number – it’s simply a snapshot of what your home is worth today, in relation to current market conditions and what other, similar properties are selling for. This value can change over time based on improvements to the property, as well as changes in your neighbourhood and the overall housing market.
Property valuation and mortgages
When applying for a mortgage, you’ll be asked a series of questions about your property. This information will help establish the property value – a critical element for determining the amount of your mortgage loan.
If you’re buying a home, your mortgage application will include the purchase price along with a detailed description of the property.
For refinancing, the lending value will be established after considering recent sales in your area, the latest municipal value assessment and any significant improvements you’ve made to the property. If you want to add the cost of any planned improvements to your mortgage application, be sure to provide all of your plans and cost estimates.
To help the process go as quickly and smoothly as possible, use the Property Information Worksheet to identify and collect the information you’ll need to complete your mortgage application.
A professional appraisal may be required if a more in-depth assessment of the value of your property is needed.
This process includes a professional assessment of the property’s physical and functional characteristics, a detailed comparison of the home to recent comparable sales in nearby areas and an assessment of current market conditions affecting the property. It’s important to allow the appraiser access to the property in a timely manner, in order to minimize the time required to obtain financing.
From time to time, the property value assessment will not support the loan amount requested. Should this happen, we can explore all options available to you.
There are many different reasons to renovate a home: to save energy (and save on utility bills), to make room for a growing family, to improve safety or increase the resale value of your home, or simply to bring a fresh new look to your home. There are also a number of different ways to finance your renovation.
Explore your options
Your own resources: For smaller renovation projects, you may consider self-funding material costs, especially if you plan to do the work yourself.
Credit card: Likewise, you can use your credit card to pay for materials for smaller renovations. But be careful not to carry the balance for too long. Credit card interest rates can exceed 18%.
Personal loan: With a personal loan, you pay regular payments of principal and interest for a set period, typically one to five years. You also have the option of a fixed or variable interest rate for the term of the loan. The interest rate on a personal loan is typically less than that of a credit card. Unlike a line of credit, however, once you pay off your loan, you’ll have to reapply to borrow any new funds needed.
Personal line of credit: This is another popular choice for financing renovations. It’s ideal for ongoing or long-term renovations since it lets you access your funds at any time and provides a monthly statement to help track expenses. A line of credit offers lower interest rates than credit cards, and charges interest only on funds used each month. And, as you pay off your balance, you can access remaining funds, up to the line of credit’s limit, without reapplying.
Secured lines of credit and home equity loans: These options offer all the advantages of regular lines of credit or loans, but are secured by your home’s equity. They can be very economical, since they offer preferred interest rates, but keep in mind that initial set-up costs including legal
and appraisal fees usually apply. Lines of credit are typically limited to 65%, while home equity loans are capped at 80% of your home’s value.
Mortgage refinancing: When funding major renovations, refinancing your mortgage lets you spread repayment over a longer period at mortgage interest rates, which are usually much lower than credit card or personal loan rates. This type of financing can allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance). Initial set-up costs including legal and appraisal fees may apply.
Financing improvements upon purchase: If you’re planning major improvements for a home you’re about to purchase, it may be advantageous to finance the renovations at the time of purchase by adding their estimated costs to your mortgage. Canada Mortgage and Housing Corporation (CMHC) Mortgage Loan Insurance can help you obtain financing for both the purchase of your home and the renovations – up to 95% of the value after renovations – with a minimum down payment of 5%.
Grants/rebates for energy-saving renovations
Across Canada, renovation grants and rebates are available from the federal and provincial governments and local utilities, especially for energy-saving renovations. If you qualify, they may help pay for some of your project’s costs.