Toronto and Vancouver are Canada's most expensive cities when it comes to owning real estate and, unfortunately, purchasers often have to consider properties outside of these areas that are more affordable.
In my experience, while the possibility of finding a less expensive home is more likely outside of the over-heated metropolises, so are the situations where additional funds to complete renovations or necessary repairs will be required.
Therefore, it's no surprise that many aspiring homeowners wonder if they can borrow extra money to renovate the property they want, and include those funds in their mortgage.
I will explain how this can be done.
Unlike refinancing that allows existing homeowners to renegotiate their mortgage by increasing their total loan amount, there isn't an opportunity to increase the mortgage in an everyday purchase situation since the mortgage loan covers the difference required after the the down payment is subtracted from the purchase price.
Purchase Plus Improvements Program - The Only Way To Access More Money For Renovations When Purchasing.
There is a program designed to help purchasers access more money on closing to complete renovations to their property. The "Purchase Plus Improvements Program" allows purchasers 120 days from the closing date of their purchase to complete desired renovations, and once completed, the additional money required to achieve those renovations gets added to the total mortgage amount.
So, for example, if a property gets purchased for $550,000 and the purchasers have a 5 per cent down payment, their initial loan amount is $495,000 (not in including any high-ratio mortgage insurance).
If the purchaser requires an extra $30,000 for renovations, for example, the lender will advance these funds to their real estate lawyer on closing to be kept in trust. Once completed within 120 days and verified with an appraisal, funds get released to the purchasers and added to the total loan amount, making it $525,000.
Although the "Purchase Plus Improvements Program" is an excellent way to access more funds on closing and increase a property's value in a short amount of time, a purchaser is required to come up with the money for renovations first.
The good news is this program is straightforward, and anyone who requires funds for renovations should consider using it. Alternatively, a purchaser would have to wait until their property value went up enough to qualify for refinancing.
Do you have mortgage questions? Feel free to call or write!
Sarah A. Colucci
Mortgage Edge, Broker 10680
Direct: (647) 773-4849
By: Sarah Colucci