Mortgage love for renovations
Are you living with a circa 1980’s style bathroom? Carpet on the floor – cracked tiles – leaky shower – old bathtub. Or would you love to upgrade your kitchen or add a new deck to enjoy our beautiful Okanagan summers? How about completing your basement to add a mortgage helper suite?
Perhaps this seems like a daunting proposition as you aren’t sure how you might afford to make these much needed changes - but there are options available.
Do you know about the Refinance Improvements mortgage? It’s a great financing choice that could help you undertake small or large scale improvements that will increase the value of your property.
At this time, the maximum amount you can refinance your mortgage is to 80% of the current value but if the refinance is for home improvements, you can refinance up to 80% of your home’s current value and then add the cost of your home renovations over and above the 80%. There are some limitations depending on the cost of the improvements being made.
Let’s say you want to complete a kitchen renovation that costs $40,000 and your home is currently valued at $500,000. We can assume that the new “Improved Value” of your home will be around $536,000 (the cost of the improvement may not add the same value to the home. Rule of thumb is that kitchen renovations normally add between 75% and 100% of the cost back to the value of the home.) You would be able to refinance up to 80% of the new value or $428,800. Without renovation you could only refinance to 80% of the current value or $400,000.
You may be tempted to use a Line of Credit but that may not necessarily be the smartest way to go.
To quote David Chilton, the Wealthy Barber, “People cannot resist lines of credit,” he said in a speech at a conference of the Canadian Pension & Benefits Institute in May 2011. “And the worst combination in the country is a line of credit and a home renovation – once they renovate one room, the other rooms pale by comparison, so they go on to the next room and it’s a never-ending cycle of renovation as they get deeper and deeper and deeper in debt.”
This program allows you take advantage of the historically low interest rates with only one payment but there are several steps to being approved for this mortgage, from obtaining quotes from contractors to ensuring that the renovations are not strictly cosmetic in nature.
If you would like more information about the financing options available for your home improvements, please give me a call at 250-826-3543 or email [email protected]
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