Purchasing a property that requires some upgrading, but no extra fund is available. Renovation cost can be added to a mortgage so that the finance can be managed easily upon a possession.
Mortgage Specialist Heidi Hamano offers one stop service for a wide rage of mortgages.
Finding a right home in this competitive market is an overwhelming task, let alone buying your perfect dream home may feel almost impossible. What if there is a mortgage program you can take advantage of to improve the value of your property by adding renovation cost to your mortgage?
Three Canadian mortgage default insurance companies offer this type of program. They grant qualified buyers the ability to borrow the cost of renovation up to 10% of improved value of their home, maximum $40,000 to be included in their mortgage loan amount.
This is an ideal option especially for first-time homebuyers who will have limited funds toward their down payment, but are still hoping to upgrade their property immediately after taking possession.
How it works is that the borrowers must provide a quote from a contractor, prior to a completion, which is then submitted to both the mortgage lender and the mortgage default insurance company for approval. You must communicate your plan with your realtor and include a condition in your Agreement to Purchase that stipulates you want a contractor to inspect the home before closing. The contractor will provide a quote that outlines the scope of work and the costs associated with it. Following an approval, the improvement costs is added to the mortgage loan. Your minimum 5% down payment should be calculated based on the improved value of the property.
The funds used towards improvement will be an advance to your lawyer for them to keep in their trust fund. Since the funds will not be given to you until all the renovations are completed, it is important for you to have access to an unsecured line of credit to cover the initial deposits and necessary costs. Once the work is completed, the lender conducts an appraisal of your property to confirm that improvement was accomplished, then instructs your lawyer to release the funds to you.
It should be noted that the cost of new appliances as well as additional expenses to build a new unit to the property (building a basement) cannot be included in the quote.
By using this program instead of buying a home that has been renovated, buyers are able to expand their real estate search to homes that need a little TLC. Purchase and Improvement programs, gives you the ability to get into this increasingly expensive market with a potential to build equity in your home. Why should you pay more for a house that someone else renovated, when you can transform it to your own?