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16 Jul

Renovate and Roll!


Posted by: Carie and Tammy Harmony Mortgage Group

We have all done this, dreamt about the upgraded appliances and how they would look so good in our dream kitchen.  While you are at it you might as well do the addition and create that beautiful en-suite you have always wanted.  Then we stop ourselves and think wouldn’t it be nice, if only I could afford it.

The truth is if you own your own home you probably can and the best part is that you will increase the value of your home.  If your dream home is one renovation away Harmony Mortgage Group has got a smart renovation tip: 

“Renovate and Roll” Roll the cost of your renovation into your mortgage for one easy monthly payment. You can then even use your prepayment features of your mortgage to pay it off faster. Depending on what you are renovating you may increase your homes worth substantially higher than what the market can yield in a given time.   For example if you do a $20,000 dollar renovation now as you continue to build equity in the home of your dreams your home will hold more value over the next 5 years than it would if you did not do the renovations.  So a home renovated now will yield a higher return based on the market than if you didn’t do the renovations.  In some cases the home that wasn’t renovated could lose potential value when it comes to resale.  In this case it would make financial sense to renovate your home to keep up with the market using our historically low interest rates.

Do the same over ten years and you would see an even greater difference as the renovated home will continue to hold value as the un- renovated home will begin to lose resale value due to the age of the home and higher cost of updating.

Mortgage Reno Refinancing:

When funding major renovations, refinancing your mortgage lets you spread repayment over a long period at mortgage interest rates, which are usually much lower than credit card or personal loan rates. This type of financing can allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance). Initial set-up costs including legal and appraisal fees may apply.

Purchase Plus Improvements Mortgage:

If you’re planning major improvements for a home you’re about to purchase, it may be advantageous to finance the renovations at the time of purchase by adding their estimated costs to your mortgage. CMHC Mortgage Loan Insurance can help you obtain financing for both the purchase of your home and the renovations — up to 95% of the value after renovations — with a minimum down payment of 5%.

Many homebuyers looking to buy older properties find themselves in a common predicament: they’ve found a property that suits them, but it needs some costly and immediate upgrades. Increasingly, buyers are adding the costs of those immediate renovations into their mortgage, instead of racking up credit card bills or selling investments to pay for the upgrades. Known as a “purchase plus improvements” mortgage, this type of mortgage covers the sale price of the home, plus any renovations that would increase the value of the property, with as little as 5 per cent down.

If you’re buying a home but want to add a second storey, finish a basement or redo a kitchen, it can make a lot of sense to add those costs to your mortgage. That way you can spread your payments over the life of the mortgage and have a cost-effective way to get your dream home. The process is quite simple:

  • Obtain cost estimates for the upgrades
  • Get your appraisal – for the value of the property “as is” and the estimated value of the property once the improvements are completed
  • Renovation costs are included in your mortgage
  • Complete your upgrades
  • Renovation funds are released by your solicitor upon completion

With rates as low as they are right now is a good time to think about that home renovation.  In many cases It is more cost effective to renovate the home you are in to your liking than to purchase a different home with the same attributes.  This way it is done to your specifications, your budget and of course your needs. 

Bottom Line:

If you’ve owned your home for a few years, chances are you’ve been building up some nice equity.  With mortgage rates hovering around historic lows, this is a great time to look at rolling the cost of your renovation into your mortgage. In fact, you might find enough interest savings in your new mortgage to help knock down the overall cost.

Come and talk to us at Harmony Mortgage Group.  We have options that the banks can not offer and we work for you.  We can walk you through all of your options and help you make a plan to create the dream home you have been wanting.