Walking through the home you see the bright pink painted walls, Green carpet and the vast array of energy inefficient items as your wondering if you will be able to pay the astronomical heating bills.
What now? Should you look for something newer? No way my friend, there is a mortgage product made just for this situation and today we are going to take a look.
A Purchase-Plus Improvement Mortgage takes into account the future value of a home with repairs or renovations as completed after the closing and this is how it works.
What’s Next? Before you rush out with your realtor to find that home that suits your needs, you really need to know a few things.
- There is a maximum amount you are allowed. Most lenders will allow you $40,000 or 10% of the home’s value as your renovation budget.
- On closing the funds are transferred for the purchase however the renovation amount are held in trust with the lawyer and will not be released until the work is 100% complete. Once the work is complete an appraiser will be called upon to come out and inspect the work to confirm the renovations have been completed.
- You will have to have at least 5% of the improved value to put down. For example, if your new home costs $300,000 and you are going to do $30,000 of improvements, you will need to have $16,500 down ($300,000+ $30,000 = $330,000 x 5% = $16,500) instead of $15,000.
- Keep in mind not all improvements will be accepted by the lender. Most lenders like new kitchens, flooring, bathrooms, siding, windows, furnaces, garages, roofing or other substantial upgrades such as finishing a basement.
- Remember you must do the renovations you’ve told the lender you would do. If you intend on doing some structural changes you will require drawings and permits to comply with building codes and receive permit approvals.
If you’re looking to upgrade your existing home the refinance plus improvements can work for you. In this case, the value of the home is determined via an appraisal “as is” and a completed value. The current mortgage is paid out and the balance of the funds are held in trust with the lawyer until the work is complete. The same restrictions as the Purchase plus Improvements apply.
The really nice part of this program is that you are able to borrow the funds to complete your renovations at today’s very low rates and your mortgage payment will increase very little.
So there you have it. A thinking outside the box way to get the funds you need to turn your house into your dream home.
We Think Outside The Box
Dominion Lending Centres
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