Renovating? Consider a Refinance Plus Improvements

Refinance Nathan Lawrence 30 May

In previous posts (links shared below) we have discussed in detail both refinances and purchase plus improvement mortgages.  Both of which are tools that can help either a current home owner (refinance) or a home purchaser (Purchase Plus Improvements) structure the mortgage in a such a way which allows the client to roll the cost of improvements into the home.

This post is going to take the idea of refinancing to access equity for home improvements one step further…Introducing the Refinance Plus Improvements Mortgage.  Similar to the Purchase Plus Improvements Mortgage, it allows you to access more money for home renovations which increase the value of the home.  The refinance is based on the future (or post improvement) value of your home.  Basing the refinancing on the future value of the property allows the borrower to access additional funds compared to a standard refinance.

Let’s take a closer look at how a Refinance Plus Improvements mortgage can get you the extra cash you need to get your renovations completed.

The Standard Refinance

An everyday refinance allows the home owner to access up to 80% of the fair market value of the home.  The value is typically determined by a Market Appraisal on the home.   Here is how it would look:

  • Current Appraised Value of the home:  $250,000.00
  • Max New Mortgage Amount: $200,000.00  ß 80% of present value
  • Your current Mortgage Balance: $190,000
  • Equity Available to you for the renovations: $10,000.00

*Note: some of the equity will cover closing costs (it is a new mortgage after all, so a new registration and fund advance needs to happen. If you are breaking a current mortgage, there could be a pre-payment penalty as well)

The remaining equity can be used towards your improvements.  But what happens if it’s not enough to cover the improvement costs?  You’re now stuck with either making sacrifices to your dream reno, covering the additional costs out of pockets, use a higher interest line of credit or not doing the renovations at all. None of which are a great options.

The Refinance Plus Improvements Mortgage

Here is how the Refinance Plus Improvements mortgage can make all the difference.

For argument sake, let’s assume for a moment that the home owner is thinking about renovating their kitchen and main bathroom.  These are in no way a small improvement. They are quite significant improvements…new flooring, cabinets, counter tops and paint in the kitchen along with a full gut and renovation in the main bathroom.

After sitting down with a Mortgage Broker to determine mortgage affordability, the home owners next step is getting estimates for the renovations.   After having multiple contractors quote on the work, the home owner settles on a contractor that has quoted $20,000.00 for the job (Labour and materials costs, all in, turn key project).  Let’s also assume for a moment that the renovations are going to increase the value of the home by $30,000.00 (side note: Kitchen and Main Bathroom Renovations can have the biggest impact on the value of a home). Here is how it would look:

Refinance Plus improvements:

  • Current Home Value: $250,000.00
  • Post Renovation Home Value: $280,000.00
  • New Max Mortgage Amount: $224,000.00
  • Your Current Mortgage Balance: $190,000.00
  • Equity Available for the renovations: $34,000.00

See the difference?  The refinance plus improvements in this scenario can get the home owner access to an additional $24,000, far exceeding the improvements planned for home.  No sacrifices required. No unsecured higher interest financing required. No need to tap into personal savings. Just a nice new mortgage with a low interest rate and one simple payment.

In a future post, we will cover the particulars regarding how the refinance plus improvement funds are advanced and a few other details that you are going to want to know.  If you have questions about how a refinance plus improvements mortgage can make all of the difference with your renovations plans, please feel free to connect with our team.  We are always happy to chat mortgage strategy with you while at the same time shopping the market and rates on your behalf!

Happy Renovating!

Purchase Plus Improvements – You just Found your Dream Home!! Sort of …

5 Reasons to Refinance Your Mortgage

 

Purchase Plus Improvements – You just found your dream home!!…. sort of

First Time Home Buyers Nathan Lawrence 8 May

In a competitive real estate market or a market that is suffering from a lack of available listings, the Purchase Plus Improvements mortgage could be your saving grace.  Regardless of whether you’ve just started your search for a new home or if you’ve been hunting for months, this is something that you should be thinking about each time you walk into a potential house.

Of all the homes that you’ve looked at so far, you have likely walked into at least one home by this point and said to yourself “Well this house looks great, but if it wasn’t for that incredibly dated _______”.  You fill in the blank here…Kitchen, bathroom, flooring, basement, etc.   If you have passed up the opportunity to purchase that potentially perfect property because of the costs of required improvements, it’s important that you know there is a solution to your problem.  Enter, the Purchase Plus Improvement Mortgage.

In a nutshell, a purchase plus improvements mortgage allows you (the home buyer) to roll the costs of improvements into your mortgage.  The new mortgage allows you the ability to finance those much-needed repairs and get you into that home of your dreams!   The mortgage comes with a great interest rate and one simple mortgage payment.  Had you chosen to purchase the home and not include the renovation costs into the mortgage, then you might end up financing the improvements on a higher interest rate unsecured debt which also give you a second payment to make each month.

The first step to take is a conversation with your Mortgage Broker about specifically how that Purchase Plus Improvements Mortgage would apply to your application and specific situation.  Understanding the types of improvements that can be included in the financing will help you better understand which potential houses might work great for you.

Working with your Realtor, the Mortgage Broker will help guide you through the final approval process.  The main difference between a Mortgage vs. a Purchase Plus Improvements Mortgage is the need for quotes.  As part of the verification process, your Mortgage Broker and the Lender will need to see a quote for the work that is planned for the improvements.  The quotes will provide us with the cost and plan details required to secure the final approval.  Getting you into a house of your dreams!

If you have questions about how a Purchase Plus Improvements Mortgage could work for you, take the time to connect with our team anytime!!

I Want to Buy a Fixer Upper … But how do I afford the Fixing Part?

First Time Home Buyers Nathan Lawrence 26 Sep

So you found the perfect home, but it needs a little TLC. Maybe you need a new roof, new furnace, new windows, or a kitchen update. All of these renovations can add up quickly and like many first time buyers, you may not have the money to cover the costs of these expensive renovations.

The good news is that there is a solution! It’s called a purchase + improvements mortgage. This allows you to purchase the home and get extra money to do the repairs as part of your total mortgage. Rather than having to come up with $10K or $20K to pay for improvements, this can be added into your mortgage. Your interest rate will also be lower than if you were to apply for an unsecured personal line of credit or putting the renovation costs onto your credit cards.

A few particulars to understand …

  • Estimates for the work will be required to get an approval for improvements.
  • Lenders and CMHC look for improvements that will add value to the home.
  • Improvements are typically required to be completed within 60-90 days from time of purchase.
  • The money for the improvements is released to you after the work is completed so you may require a way of carrying some costs until the work is done.
  • The improvements can be completed by yourself or a contractor. If doing the work yourself, only the costs of materials can be covered.
  • Depending on the scope of the work, applicable permits may be required.

 

Lenders don’t mind lending money to do improvements as it adds to the value and marketability of the home. A purchase plus improvement mortgage is a great way of turning that home with potential into your dream home. When getting pre-approved for your mortgage take the time to speak with your realtor and mortgage broker about how a purchase plus improvement mortgage may work for you!

Feeling the Winter Blues

General Nathan Lawrence 13 Jan

We sometimes overlook the simple things that can positively change the way we think during the cold winter months.  Your home is the best place to start. During the winter months we tend to hibernate at home, so why not look at ways to do things in your home to make you feel better about yourself and your home? This will help you stay motivated and inspired during the cold winter months.

Plan that much needed home renovation!

Look at areas of your home that you have been thinking to change or upgrade. Spend some time and start to visualize the home that you want.  Then take the time and start planning for that dream home renovation. Get everything organized now, and you just might have hammers swinging by spring time.  Your next step, find out if it is financially feasible. Consult with a mortgage professional about a renovation mortgage and an interior designer to review your home projects with you. Knowing that you are financially prepared and working with professionals towards a home project will keep you excited and something to look forward to.

Keep your home and yourself, healthy and fit!

Start by giving your home a good cleanse.  LET GO of what is not needed or you have no use of. If you haven’t used it in a long time then you don’t need it. Having a clean and organized home will in turn make yourself feel better about spending time indoors.  Fill your fridge and freezer with healthy foods.  Winter months are good to pre-make meals in advance and freeze. Soups, stews, sauces, and healthy loaves and muffins are easy and fun to make.

Dress up your house…in a budget friendly way!

Do little things in your home to keep yourself motivated, energized and inspired.  Add budget friendly décor pieces such as candles, warm throws and pillows, fresh flowers, fill glass vases with outdoor pieces like pinecones or grass stocks.  Update cabinet hardware or light fixtures. Replace old towels with new soft towels, or even simply change your bathroom curtain and hooks to make it feel like a new space. These are all ways to stay connected to your home to help with the winter blues.