Renovation Financing

 My colleaguem Pam Pikkart published this great blog on renovating. Here it is in its entirety. 

Renovation Financing

So you have found a great house.  The neighborhood is wonderful.  Mature trees, lower property taxes, schools within walking distance and easy access to a variety of amenities.  But the house is, how do I put it, retro at best.  You wonder how you will tolerate the bright pink carpets and the vast array of energy inefficient items has you wondering if you will be able to pay the astronomical heating bills.
What now?  Should you look for something newer? No way my friend, there is a mortgage product made just for this situation and today we are going to take a look.
Purchase Plus Improvements is the name of this product and this is how it works. You head out with your Realtor to choose the best house for your needs.  You write up an offer and bargain your way to the best price.   In the meantime, you contact a qualified contractor or other service providers, to get quotes for the work you would like to do.  These quotes are provided to the lender as a part of the financing process.  The lender reviews and provides the thumbs up.
But you before to rush out to do just this, you really need to know a few things.

1. The day of possession, the funds are transferred for the purchase of the home so you are able to move in and start the renovations. The balance of the funds are held in trust with the lawyer and will not be released until the work is 100% complete. An appraiser will be sent to your home to verify the work is done. You may want to arrange access to a line of credit so you will be able pay for any deposits or other costs in the interim as you will only get the funds upon completion.
2. There is a maximum amount you are allowed. Most lenders will allow you $40,000 or 10% of the home’s value as your renovation budget.
3. You will have to have at least 5% of the improved value to put down. For example, if your new home costs $300,000 and you are going to do $30,000 of improvements, you will need to have $16,500 down ($300,000+ $30,000 = $330,000 x 5% = $16,500) instead of $15,000.
4. Not all improvements you propose will be acceptable to the lender. The Travertine tile imported from Italy may be gorgeous but it does not necessarily add a dollar-for-dollar value.   Lenders like new kitchens, flooring, bathrooms, siding, windows, furnaces, garages, roofing or other substantial upgrades. They will sometimes allow appliances or landscaping but this is a case by case decision.
5. You must do the upgrades you said you would do to get the funds. It has happened that once a homeowner took possession of their home they opted to make different improvements, however the lender is not likely to release the funds for work they did not agree to in the first place.
6. There is a time restriction. Most lenders allow only 90 days for the work to be completed.  If some of the work is seasonal you should make sure your lender will allow a relaxation on the restriction.

This product can also be great for people purchasing a brand new home.  This is an easy way to get the funds you need to finish the basement or the fencing.
There is also a similar program for homeowners looking to upgrade their existing home.  In this case, the value of the home is determined via an appraisal “as is” and a complete system.   The current mortgage is paid out and the balance of the funds are held in trust with the lawyer until the work is complete.  The same restrictions as the Purchase plus Improvements apply.
The really nice part of this program is that you are able to borrow the funds to complete your renovations at today’s very low rates and your mortgage payment will be only slightly higher.
So there you have it.  A simple way to get the funds you need to turn your house into your dream home. Your mortgage professional at Dominion Lending Centres can answer any questions you may have about this program.

Home Renovation Financing Options

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. CMHC Mortgage Loan Insurance for Energy-Efficient Homes: 10% CMHC mortgage loan insurance premium refund, and a premium refund for a longer amortization period (if applicable). ecoENERGY Retrofit — Homes: grants of up to $5,000 to offset the cost of making energy-efficiency improvements. Provincial and Municipal Entities Offering Grants and Incentives Rebates and Incentives for Selected ENERGY STAR® Qualified Products in Canada

for more information contact me at http://davidcooke.ca