The following content was written by James Leitch and is part of my Partner Series Blogs.
Found a house that has almost everything you want but needs some updating, perhaps a new kitchen or bathroom? With the new rules restricting homeowners to a maximum of 80% of the value of your home on refinance it might take years before you can build up enough equity to allow you to accomplish those renovations and finance them through your mortgage. Saving money on interest compared to an unsecured line of credit or other financing.
But there is a solution for home-buyers to help turn the house that has almost everything into the home that has it all. The program is called Purchase Plus Improvements. This allows buyers to pre-approve additional funds to complete renovations to their new home and fold the costs of those renovations into their mortgage, even if you only have 5% down payment.
The process of getting these funds for renovations has a few key points:
- Depending on the route taken you can receive between 10-20% of the value of the home, usually capped at $40,000.
- The down payment will be made on the “as improved” value of the property.
- To get the approval for the additional funds, quotes must be obtained for all the work to be done and approved by the lender and usually the insurer, ie. CMHC.
- Depending on the lender and insurer you’ll have 3-6 months to complete the work.
- During the work you will need to cover the costs of the renovations until completions, either through a line of credit/credit card or agreements with the contractors as to the timing of payment structure.
-The funds will be held in trust by your lawyer until the work is completed.
- A post completion inspection and/or paid invoices will be required to confirm the work has been done allowing the money to be advanced by your lawyer.
For more information you can give me a call and I’d be glad to go over the programs in more details.
Mortgage Agent M12001647