Are you at a point where you are deciding whether to do a Refinance Mortgage Guelph or move to a new home? Does the thought of moving and all the associated costs a little overwhelming. Before you make that big decision, why not consider using the potential equity in your home that renovations would create. This is a Refinance Plus Improvement mortgage or also a Refinance Mortgage Guelph.
Now, does the thought of doing the work yourself conjure up images of half- finished jobs or months and months of renovations as you try and do them in your spare time? Why not have the funds available so you can pay someone else to do the work! Maybe you just don’t have the time or experience to do the renovation yourself or want it done fast so you can enjoy it now! Why not at least have the choice!
This unique type of mortgage has allowed many of my clients has been designed for those who already own a home that may require some immediate upgrades. If the property isn’t exactly what you want, then build it, renovate it, add it, upgrade it! Maybe you have a desire to add your own personal touch to your home or increase your living space, so create your own dream home by……
- Adding a new or updated kitchen
- Developing the basement for more living space or visiting friends and relatives
- Updating or replacing the carpeting or maybe adding hardwood
- Adding a garage or work room
- Adding a media room or “man cave”
- A new bathroom with maybe a jetted tub – your personal sanctuary
- A new roof
- A more efficient central air or furnace system
- Adding new siding, eaves or fascia
- Replacing or updating doors and windows
- Adding a swimming pool or major landscaping
So how does it work? …..
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
- 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 $40,000 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!
Of course, the lender is happy because they now have a mortgage on an improved home!!!
As an expert in this unique type of Refinance of Your Ontario Mortgage, I can answer all your questions and provide you with recommendations for great contractors. You can contact me at 519-760-4391 or firstname.lastname@example.org