Navigating the world of real estate can be a challenge at times. Thankfully, you don’t have to build a new house from scratch to be able to live in an affordable, yet stylish, home. A great alternative to moving is to renovate, even if you don’t have enough cash on hand for all the needed costs. That’s where mortgage financing can come into the picture. Read on to learn how to find a mortgage broker for large home renovations.
When applying for a home improvement mortgage, there’s a lot you need to pay attention to. How much mortgage you pay should be taken into account alongside any other potential costs you might have to take care of down the road. Calculate your costs carefully, and pay attention to the finer details. You might want to keep some money aside from miscellaneous renovations, too, as there can always be surprises when renovating. Generally, a cushion of 20-30% of the overall planned costs should do the trick in most cases. Ask for prices from different contractors to get the best deals. This will allow for a realistic and sustainable level of financing.
Look for Government Programs
If you’re wondering how you could choose a mortgage option, that’s where mortgage brokers come into the picture. A large home renovation can be very costly, which means that lenders will generally be more selective in approving applications. It helps if the property in question is relatively expensive to begin with because that will improve your Loan-to-Value (LV) ratio. However, there are still a number of choices for people who do not own a luxury property. For example, in Canada, the Canada Mortgage and Housing Corporation, a government-backed insurer of mortgage loans, offers a product known as the CMHC Improvements Program. This program is specifically designed to help homeowners cover the costs of renovation. It’s helpful if you find a mortgage broker that offers access to such programs, as you never know how much money you could save on mortgage insurance and other related costs.
Make Your Home Green
If you’re renovating to improve your home’s energy efficiency, the CMHC also has a program tailor-made for homeowners who want to make their house greener. The CMHC Green Home program offers a partial refund for the cost of mortgage loan insurance for renovators who decide to make substantial energy efficiency upgrades. Caring for the environment is great, and it’s even greater if your mortgage agent is on board with it. Home renovation is made easy when you’re on the same page with your agent and work as a team to get the best results for your environmentally friendly needs. After all, it’s best for all of us if we do everything we can to save the earth. You could even achieve sustainable living objectives, making your house far more valuable than it already was.
Talk About Financing Options With Your Mortgage Broker
Once you decide to renovate, what are your financing options? When choosing a mortgage broker, it’s best to check out the range of their interest rates and fees. Don’t just think in terms of cheapness, though. The agents from Victoria’s Best Mortgage state that it’s best to choose a local mortgage broker who knows the ins and outs of the market where you happen to be, rather than a larger company whose employees don’t have the time to focus on the needs of individual clients.
Once you’ve made your choice, there’s a whole range of options to choose from. Just some of the many options in Canadian home renovators include HELOC (Home Equity Line of Credit). This basically works like a line of credit, which you can use whenever a certain expense comes up during your renovation. It’s a cheap and effective way to limit your costs. A second option is what’s known as a mortgage “add-on,” which is basically a second mortgage. It’s cash in one lump sum, but it can be more expensive and also harder to repay. You could also just refinance your existing mortgage, up to 80% of the property’s value. This also provides you with a single sum that you can spend freely. Further, a more radical type of mortgage product that has been making the rounds in Canada and the U.S.A. as of late, and it’s known as the Refinance Plus Improvements mortgage. In this program, the projected value of your property is calculated into your mortgage, meaning you can get up to 10% more credit in this case. Of course, it goes without saying that this option is riskier, so lenders may only pay you after the renovation is finished, and you’ve successfully made sure that everything is alright. This also comes in a second form known as Purchase Plus Improvements, where you can receive a mortgage that includes the price of your property and the sum of improvements you plan on doing.
Learn How to Find a Trust-worthy Mortgage Brokers
When choosing a mortgage broker, it’s definitely worth getting informed about the full range of products they provide, and how much product variety you’ll have access to. Each customer’s needs are different, so it’s great if your broker has extensive experience in your local market with other clients who have done extensive renovations. Stay informed, and take the time to talk to people who’ve already done renovations with refinancing. Fixer-upper mortgages, like any other type of mortgage loan, are a risk for the lender, and the agent will want to have as much information as possible about your reliability as a borrower. A good mortgage broker will help you understand and assess the feasibility of your home improvement projects. It’s especially important to avoid cost overruns, as this can greatly extend the time period of your renovation while damaging your credibility. Nobody likes unfinished properties, so ideally, your mortgage broker will work with you to avoid such an expensive debacle.
One small word of advice: don’t be a flipper, at least when it comes to searching for home loans. Buying and selling properties for short-term gain can be a great source of short-term income, but as a rule, lenders do not like to lend to individuals who engage in such speculative activities. Buying and holding a home for the longer-term is also better from a tax perspective under current Canadian laws.