You found the a home, in the RIGHT location...but the kitchen and bathroom are SO dated!
We help home buyers pay for their renovations, with one manageable mortgage, with as little as 5% down!
The Step Process
Get quotes for all the work you want to have done. You can do this with HomeDepot or Rona. It will itemize not only each item, but labour costs as well. You can get a separate labour cost from a construction company. Remember, labour costs DON'T add value, so watch for those labor costs to not be inflated.
Appliances, hot tubs, pools are not allowed to be factored into the renovation costs. Only tangible and actual "value adding" upgrades.
I will submit the QUOTE with the approval application to CMHC or Genworth for their purchase plus improvements mortgage program
You will need to have funds UPFRONT to cover the cost, as funds are held back at the lawyers office until the work has been approved and fully completed. You usually have 120 days to complete the work after your mortgage closes
You can open a Home Depot / Rona Card, apply for our CFF $25,000 Line of Credit (no income documents required) or fund it from your own sources. DO THIS PART AFTER YOUR MORTGAGE FUNDS!!!
Keep all receipts of paid, direct costs of your renovations.
When your complete, let me know and I will submit your receipts to the lender for approval. If your costs are under $15,000 usually just receipts are required; if over $15,000 an inspection by lender certified appraisal will be required (your cost). Each lender has different protocol on how this step is completed.
Once the appraisal inspection report is confirmed and completely properly, and the increased value is in place, the lender will let the lawyer know to release the money back to you.
A couple points to remember:
(CMHC) will approve a loan of up to 95 per cent of the ‘as improved’ value of the home, provided the money you’re putting into the home does, in fact, improve the value. Remember just because it costs $10,000 for the kitchen, doesn't mean it will IMPROVE the value $10,000. Good to chat with your Realtor on this.
You will need to fund the project costs up-front either using your credit cards or Line of Credits. You maybe able to find a contractor that will fund costs as they know the mortgage has been approved for a certain amount.
Here is an example:
The estimated cost of the renovations is approx. $40,000. The current appraisal value and sale price of the home is $400,000. Instead of the standard 5% down on the $400,000 ($20,000), a Purchase-Plus Improvements Mortgage lets you place 5% down on the future value of the home ($440,000) which includes the cost of the basement renovations.
Cost of Home:
$ 425,000
Standard Down Payment (5%)
$ 22,250
Projected Cost of Renovations:
$ 40,000
Approved Future Value:
$ 465,000
Total Down Payment (5%):
$ 23,250
So instead of spending $40,000 of your own LINE of CREDIT, Savings or HomeDepot card; you can just spend an additional $1,000 in your downpayment and build the entire amount into you mortgage.
Happy Shopping!
Kiki Berg, Your Mortgage Expert