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The-Mortgage-Gal

Perfect (reno'd) home

How many times have you found a home in the perfect location, but it needs too much work as per the home inspection?

There is a great program available through most lenders that will allow you to add the costs of renovations to your purchase price, and finance them over the life of the mortgage. This program can also be used to update a home that is showing wear and tear. or has dated finishing.

Here are just a few advantages to using this program rather than using other sources of funds:

1)   If you have the money for the renovations, you can use this as part of the down payment and save on the insurance premium if you have less than 20% down.

2)   The payments on the renovations are amortized over 25 years, so the monthly cost is minimal compared to a personal loan.

3)   If the renovations are to be done within the first five years of ownership, chances are that there will not be enough equity to refinance during that time to complete the renovations, and legal & appraisal costs will need to be paid again.

4)   You can have all of the renovations done when you first move in before your belongings are unpacked.

There are two programs available:

The small renovation which is a maximum of 10% of the purchase price.

The draw renovation that is over 10% of the purchase price.  

The advantage of the first program is the ease of advancing funds and low costs. The purchaser is required to get an estimate for the renovations that they wish to do, and these are added to the purchase price for financing, then the minimum 5% downpayment is required based on the new cost. On closing, the money for the home is advanced and the balance of funds are held with a lawyer until the work has been completed. Once the work is completed, the lender will require paid invoices or an inspection from an appraiser before the funds are released to the purchaser.

The larger renovation is similar, but the cost of the renovations are held back by the lender and released as draws, which involve some increased legal costs. The property is appraised to determine the ‘as improved value’, and this value is used to determine the downpayment required.

Here are some of the renovations that can be included in the mortgage financing:

1)   Kitchen updated including flooring, counters and cupboards

2)   Flooring and painting

3)   Replacement of roof, hot water tank and furnace

4)   Adding a basement suite if legal or licensed

5)   Building a garage

6)   Replacing windows, doors and insulation

If you find a home you like but it needs renovations, make sure you ask about purchase plus improvements.  

 

For further information on this program or to find out if you would qualify please call 250.862.1806 or email [email protected]



More The Mortgage Gal articles

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About the Author

Tracy Head and Laurie Baird help busy families find mortgage solutions. Together they have more than 45 years of experience in the mortgage industry.

With today’s increasingly complicated mortgage rules, Tracy and Laurie spend time getting to know the people they work with and help them to better understand the mortgage process. They support their clients before, during, and after their mortgage is in place.

Tracy and Laurie work closely with their clients, offering advice and options. With access to more than 40 different lenders, Tracy and Laurie are able to assist with residential, commercial, and reverse mortgages in order to match the needs of their clients with the right mortgage package.

They work closely with their clients to find the right fit, and are around to provide support for years down the road!

Contact them at 250-862-1806 or visit http://www.okanaganmortgages.com

Visit their blog at https://www.okanaganmortgages.com/blog

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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