Home renovations are a hot topic when we get into the warmer months of the year. Not many people realize they can refinance their mortgage to access home equity to fund their renovation. Leveraging your mortgage for renovations isn’t only for those who are already homeowners. First time home buyers have the option to get a home improvement mortgage, providing the ability to afford a renovation that could turn a fixer upper into a dream home.
Refinancing For Home Improvements
For those who already own their home but want to make some improvements, refinancing is a great option. A homeowner can borrow up to 80% of the appraised value of their home minus the amount owed on the mortgage. Remember that for refinancing your mortgage, appraisal and legal fees may apply to set it up. Talk to your mortgage broker about your unique mortgage situation.
First Time Home Buyers Home Improvement Mortgage
It’s common for first time home buyers to find the perfect home in the perfect location, and almost every box is checked-off, but the plumbing needs some work, or the kitchen needs an update. You didn’t want to miss out on your dream home, but affording the renovations on your own is tough – this is where the home improvement mortgage comes in. According to the Canadian Mortgage and Housing Corporation,
“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%.”
Benefits of Home Renovation Mortgages
There are a couple unique benefits to pulling equity from your home, or getting home improvements included in a mortgage.
This will spread out your payments over a longer period of time. There is no need to spend all your savings or come up with a large lump sum of money in order to pay for renovations especially if the renovation is absolutely necessary, i.e. a leaking roof. This is very beneficial for first time buyers who need to do some improvements but don’t have the immediate cash flow to do so.
The interest rates for mortgages are usually much lower than credit cards or other personal loan rates. This will help you save money which is perhaps the biggest reason for using a mortgage to access funds for renovations. Plus, there is less worry about leveraging yourself in multiple areas if that is a concern.
Do You Qualify?
Qualifying for a home improvement mortgage or refinancing for home renovations is a simple question: does the renovation make sense? In essence, this means that the cash out is based on the property value or the potential property value of the finished renovation. If your home will have an increased property value once the renovation is completed, it is likely to be approved.
Planning Your Home Improvement Mortgage
Here are steps you can take to ensure you’ll have a successful home renovation.
Decide which areas of your home need attention
Whether you’re looking at small scale renovations or large add-ons to your home, it’s important to identify the problem areas in a list from high to low priority.
Determine how much money you will need
Get quotes from specialists who you’d like to work on your home to get a solid idea of your options and costs.
Review your finances and budget
Your financial advisor can lend support in this area to make sure your budget is realistic for your financial situation.
Get your home appraised
You will need to have your home appraised to find out what it’s worth in order to discover how much money you can access with your refinancing or home improvement mortgage.
Talk to your mortgage broker about your options for refinancing or home improvement mortgages.
Sign the documents
Your mortgage broker should be with you every step of the way to ensure the documents are correct and you’re getting exactly what you need!
What Is Best For You?
Each and every situation is different. It’s important to seek support from an expert who can decipher all your options and guide you along the way. Using a mortgage broker is a free service, take advantage of an expert today! Ask Tim about home renovation mortgages and refinancing.