Top 10 Most Common Spring Renovation Projects & The How


I love this time of year!  The days are longer, the weather is warmer and the sun is shining – well, when we are not having those April showers.

This time of year always gets me up and moving, starting my spring cleaning indoors and I always catch myself brainstorming on what my next spring project around my home will be.

Currently, I have lived in my home almost 2 years and with this booming real estate market this year, I have seen the houses on my street and in my neighbourhood sky rocket in price. For me, my intention is not to move for a few more years but while this market is hot, there is money to be accessed from my property that will help me to make those spring renovation projects a possibility!

While living in your current home, do you find yourself thinking about how you can improve your home? and have you ever wondered how you can obtain the money to complete the renovation projects you have been thinking of doing?

If your home isn’t exactly how you want it and you have been wanting to add your own personal touch, here is a list of the top 10 most common spring renovations projects:

  1. Adding a new or updated kitchenRefinance Mortgage Guelph, home improvements
  2. Developing the basement for more living space
  3. Updating or replacing the carpeting or maybe adding hardwood
  4. Adding a media room or “man cave”
  5. A new bathroom with maybe a jetted tub – your personal sanctuary
  6. A new roof
  7. A more efficient central air or furnace system
  8. Adding new siding, eaves or fascia
  9. Replacing or updating doors and windows
  10. Adding a swimming pool or major landscaping

So how can we find money to do these upgrades to your home?…..

  • First, you will need at least 20% equity in your home based on its current value.
  • Before the mortgage financing is arranged, written quotes are obtained from licensed contractors or suppliers for the repairs and/or the improvements to be done to the home.
  • The application for mortgage financing is requested and is made for 80% of the current value plus 80% of the cost to complete the improvements.
  • The lender will “hold-back” on closing the “improvement” portion of the mortgage until the work has been completed and inspected, normally within 30 to 60 days of closing.
  • Once the work has been completed, the lender will advance the balance of the funds to either you or your contractors.
    What does this mean?
  • Let me give you an example with 20% equity on a property with a value of $400,000:

Current Property Value: $400,000 x 80% = $  320,000
Cost of improvements: $  40,000 x 80% = $    32,000
Total New Mortgage*: $440,000 x 80% = $  352,000

The Steps:

  • An application is made for a total mortgage in the amount of $352,000, which represents 80% of the improved value of your property.
  • Now of course you may already have an existing mortgage or secured line of credit on the property and this will either be included in the new mortgage (blended) or paid out completely.   It will depend on what type of existing financing you have on the property on what your options would be.  Let’s assume you have an existing mortgage of say $320,000 which is 80% of the value of the property.
  • On closing of your new mortgage amount of $352,000 it will replace your existing $320,000 mortgage leaving a total of $32,000 in this case for renovations.   This $32,000 will be held in trust at your lawyers and you will receive it as soon as the work is completed.  This is known as a “hold back”.  The lender of course doesn’t want you to have access to the funds, and then actually not end up using them for the renovations!
  • The mortgage is arranged and then the contractor or yourself, complete the improvements as soon as possible and then the lender advances the hold-back of $32,000, and you pay the additional 20% of the cost of the improvements ($8,000) and the $32,000 owed to the contractor or you directly, can be paid as per the original quote for the work.
  • Everyone is a winner!  You are happy because you got $32,000 of improvements done to the home with a cash outlay of only $8,000!  With current interest rates still historically low, this is much cheaper than adding the cost to a credit card or line of credit – let the equity in your home pay for the renovations and of course, the lender is happy because they now have a mortgage on an improved home!!!

Being an expert in this unique type of refinance, I can answer all your questions. You can contact me at 519-760-4391 or melissa@melissabendo.com


The Top 20 Things NOT To Do Before Your Mortgage Funds


There are some things to remember and keep in mind when you are purchasing a home or waiting for your mortgage to fund.  It is very important that you consider all of the following to ensure that there aren’t any preventable issues that arise.

You will find that everyone is an expert at telling you what-to-do when you purchase a home or shop for a mortgage.  I also think it is just as important to let you know what you shouldn’t do.  As your professional mortgage agent, I will do everything I can to ensure a smooth closing for you and your family.  Here’s a list of things that you might not realize could impact your mortgage approval

Income and Employment Changes

  1. Avoid losing your job – do not resign
  2. If you are on probation with your employer, let me know
  3. Do not reduce your income level
  4. Do not change the status of your employment from full-time to part-time
  5. If you are currently on maternity or paternity leave, or think you will be shortly, let me know
  6. Don’t forget to disclose if you are currently on short-term or long-term disability
  7. If you receive other income such as Canadian Child Tax Credit, and it’s going to stop soon

Down Payment and Closing Costs, remember..

  1. Do not spend your down payment on other things!
  2. Avoid surprises, by making sure you have enough money for ALL closing costs
  3. Try not to let your investments slip to a lower value
  4. If you are using your RRSP, it can take a while to complete the withdrawal process

A lender reserves the right to review your credit rating just before the closing date of your mortgage – if there have been any material changes in your rating, they could withdraw their mortgage approval, avoid this happening by…

  1. Not increasing your debt load unless we have talked about it
  2. Not buying big ticket items like a new vehicle without talking to me first!
  3. Not volunteering to guarantee or co-sign on a loan or mortgage for anyone else
  4. Not applying for new credit cards or loans
  5. Not opening a “don’t-pay-for-a-year” account
  6. Not closing any accounts unless I advise you to

And finally…

  1. Don’t wait until the last minute to arrange for property (fire) insurance.
  2. Don’t just accept the life insurance package offered by the financial institution
  3. Don’t ignore telephone calls from your lawyer, realtor, or me!

Let me help you make your home financing process as smooth as possible by emailing me at melissa@melissabendo.com or call 519-760-4391.


Collateral Mortgage


A collateral mortgage is basically a different method of registering a “lien” to secure a mortgage or loan against your property.  A collateral mortgage used to only be used for lines of credit but is now becoming popular with major financial institutions when providing a regular mortgage.  It differs from a regular mortgage in some very important ways and below is an outline of those differences and how they affect you.  It is very important that you are fully aware of all the advantages and disadvantages of this type of collateral charge mortgage:

The lender may register a higher amount on title than is actually borrowed at the time the mortgage is originally set up.  This is often as much as 125% of the value of the property at time of registration – you will notice that this is either outlined in your Mortgage Commitment and/or at the lawyers’ office in their legal documents.  This results in the lender “protecting” ALL of the current and future equity in your property and not allowing you to add secondary financing at a later date with a different lender.  You would still be able to borrow using the equity in your home at a later date, but would be limited to ONLY the options provided by the existing lender.  If they don’t approve you, or have a product or terms including a rate that is competitive, you would have no choice but to pay out the existing mortgage and incur both legal fees as well as a potential penalty.  collateral mortgage

Unlike a standard mortgage, a collateral charge is re-advanceable:  This means the lender can lend you more money after this mortgage has funded without the need to pay a lawyer.  Remember, this may be subject to you qualifying.

A collateral charge is non-transferable — it cannot be transferred or switched to a new lender like a regular mortgage without incurring legal fees.  This impacts you when it comes to the end of your mortgage term and you want to renew.  At this time you want to ensure that the existing lender is offering you a competitive option – if they are not, and you want to move to another lender that is, then it would be treated as a refinance.  So even though you may not be increasing the amount you owe, you will still incur legal fees to move to another lender.

Regular mortgages put all of the key terms in a document that’s registered with the provincial land title/registry office.  A collateral mortgage, however, puts key terms in a loan agreement which is not registered in the same way. This collateral loan agreement may therefore contain terms such as:

  • The lender has the ability to change the interest rate at any time.  Although this usually only occurs if you are in default, it can occur on certain products such as lines of credit, overdraft facilities etc.|
  • You can increase your loan amount without re-registration on title which means no legal fees
  • Unsecured debt such as credit cards, overdrafts, loans, etc., can become interconnected.  The lender can use your mortgage payment to pay down other debts you have with that lender (if you default on those debts).   So for example, you have a Visa card and you are late in making the minimum payment; if the visa card is with the same lender as the mortgage, they can transfer your mortgage payment to the credit card instead, without your permission, which immediately means your mortgage is now in default.  They can now contact you and ask for you to pay back the entire mortgage immediately or foreclosure proceedings will commence.
  • If you are late or default on paying home insurance, property taxes or condo fees, just like 3) above, your collateral charge mortgage could be used to pay them off and then “called” and foreclosure procedures commence.
  • On Demand: You will be signing a document at the lawyers that confirms that this mortgage is “on demand”.  The lender can ask to be repaid at any time with no recourse to the lender.  This usually only happens in default but as outlined in 3) and 4) above, this could mean default on other debts and NOT just your mortgage

Collateral mortgages may be very beneficial to some people in the right situations and not a great fit for others. Let me help you pick the best mortgage option for your scenario. Call me at 519-760-4391 or email me at melissa@melissabendo.com


Multiple Offers – What Do I Do?


Disclaimer & Explanation of Content:   The information of having multiple offers contained herein is for guideline purposes only and  not to be deemed to be legal advice.  It is written in general terms relating to the purchasing real estate.

Definition: A multiple offer scenario occurs when more than one buyer is presenting an Offer to Purchase to a seller at the same time.  All the offers are being reviewed at the same time by the seller for consideration.  When markets are considered a “seller’s market” this can often occur when buyers are vying and competing to have their Offer accepted over others.  There are many cases where this is a valid and sometimes normal strategy.  However, on occasion it has been known that these buying frenzies and multiple offer scenarios, can be artificially created by others.

As a mortgage broker my role is to ensure that I can secure financing that not only meets your needs, but also provides you with the dollar amount you require.  When there are multiple offer scenarios many buyers are tempted to either:

  1. Go in “firm” with an Offer with no conditions at all in the hope that you win, and/or
  2. Go in at a much higher purchase price than may be necessary – often over list price.  This is what I like to call an emotional price premium on the property.  You may be tempted to pay whatever it takes to get the home and that increased price is the emotional price tag that you agree to pay, but someone else might not

As my priority is to ensure your financing is secure, there are a number of things to consider when going in with a multiple offer scenario and you are tempted or pressured to do the above:

You as the borrower can be pre–approved BUT this is always subject to the property being approved by the lender.  So if you go in firm with no financing clause in your offer then you need to be aware that there are risks with this.  The lender might not like the property you are purchasing because it may:

  • Be unique
  • Have structural issues
  • Requires major repairs
  • or Doesn’t meet the lenders specific guidelines

The lender that previously pre-approved you, may now decline you based on the property.  There are always other lenders that may consider offering you a mortgage but you may have to consider:

  • Increasing your down payment
  • A higher rate,
  • Not being able to select specific features you wanted
  • Even higher fees involve

Remember that the lender will provide you financing based on the purchase price or appraised value, whichever is the lesser.   So let’s assume your purchase price cannot be supported by the lender, appraiser or default insurer – if this occurs, then you have to come up with the shortfall in value.  For example, you are purchasing with a 5% down payment mortgage that you are already pre-approved for.  Your offer was accepted in a bidding war for $350,000 BUT the default insurer and their appraiser believe the value is $330,000 – it is possible that you have paid that emotional price premium that the lender doesn’t want to loan against.  So the lender will therefore provide you with a mortgage based on 95% of the appraised value of $330,000 as  it is the lessor so $313,500.  You still have to pay $350,000 for the property and so your down payment is now $36,500 instead of $17,500.  The difference will come out your own pocket.

So how do you avoid this potentially happening?   When you are in a market where there are “supposedly” multiple offers and bidding wars, I recommend inserting the following clause into your Offer to Purchase Agreement.

“This offer is being submitted on the basis that it is part of multiple offers. If the seller receives no other offer by 10 pm, the seller or the seller’s salesperson, will notify the buyer or the buyer’s salesperson and the buyer will have one hour to revise or revoke their offer.  If the seller accepts the buyer offer, the seller shall provide, within 24 hours, the name, address and phone number of the salesperson and brokerage company that submitted the competing offer.” 

Note: This clause was written by esteemed real estate lawyer and author, Mark Weisleder.  Feel free to consult with your real estate lawyer for further advice on this clause.

Of course I am NOT a licensed realtor and this is just simply a recommendation to ensure you are being presented based on fact and not “fictional multiple offers or bidding war scenarios”.

Please be prepared that you may get some backlash from the realtors involved but if there are genuinely competing offers being presented, then I see no reason why they wouldn’t be okay with this clause – do you?

Wishing you all the best in your house hunting – there is the perfect property out there for you – sometimes it is just a matter of patience!

Please connect with me to discuss your option and get yourself pre-approved at 519-760-4391 or email me at melissa@melissabendo.com