Home Renovation Financing Options 2

Other Considerations and Options

Planning for the Unforeseen

It’s a good idea to set aside a percentage of your renovation funds to cover items not included in your renovation contract, for things you discover you’d like to add once work is under way, like extra or upgraded features, furniture, appliances and window coverings or for contingency.

A separate fund lets you make decisions easily, without having to renegotiate your financial arrangements or reapply for new funds.

renovationGrants and Rebates for Energy-Saving Renovations

Across Canada, renovation grants and rebates are available from the federal and provincial governments and local utilities, especially for energy-saving renovations. If you qualify, they may help pay for some of your project’s costs.

The Small Print

This content is provided for informative purposes only. It does not constitute or substitute financial or other advice.
Marla Daniels assumes no liability in connection with the information provided.

Home Renovation Financing Options

There are many different reasons to renovate a home: to save energy (and save on utility bills), to make room for a growing family, to improve safety or increase the resale value of your home, or simply to bring a fresh new look to your home.

There are also a number of different ways to finance your renovation. Read on to obtain information for a number of financing options, along with practical advice to consider before starting your renovation project.

Before You Begin

renovation timeWhether you intend to finance your renovation yourself or borrow money, you should talk to a financial advisor and to your lender before you make firm plans. They can help you understand your options, and advise you on how much you can borrow and even pre-approve you for a loan. This information will help you plan realistically.

Explore Your Options

Your own resources: For smaller renovation projects, you may consider self-funding material costs, especially if you plan to do the work yourself.

Credit card: Likewise, you can use your credit card to pay for materials for smaller renovations. But be careful not to carry the balance for too long; credit card interest rates can exceed 18%.

Personal loan: With a personal loan, you pay regular payments of principal and interest for a set period, typically one to five years. You also have the option of a fixed or variable interest rate for the term of the loan. The interest rate on a personal loan is typically less than that of a credit card. Unlike a line of credit, once you pay off your loan you will have to reapply to borrow any new funds needed.

Personal line of credit: This is another popular choice for financing renovations. It is ideal for ongoing or long-term renovations since it lets you access your funds at any time and provides a monthly statement to help track expenses. A line of credit offers lower interest rates than credit cards, and charges interest only on funds used each month. And, as you pay off your balance, you can access remaining funds, up to the line of credit’s limit, without reapplying.

Secured lines of credit and home equity loans: These options offer all the advantages of regular lines of credit or loans, but are secured by your home’s equity. They can be very economical, since they offer preferred interest rates, however initial set-up costs including legal and appraisal fees usually apply. Lines of credit and home equity loans are usually limited to 80% of your home’s value.

Mortgage refinancing: When funding major renovations, refinancing your mortgage lets you spread repayment over a long period at mortgage interest rates, which are usually much lower than credit card or personal loan rates. This type of financing can allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance). Initial set-up costs including legal and appraisal fees may apply.

Financing improvements upon-purchase: If you’re planning major improvements for a home you’re about to purchase, it may be advantageous to finance the renovations at the time of purchase by adding their estimated costs to your mortgage. CMHC Mortgage Loan Insurance can help you obtain financing for both the purchase of your home and the renovations — up to 95% of the value after renovations — with a minimum down payment of 5%.

The Small Print

This content is provided for informative purposes only. It does not constitute or substitute financial or other advice.
Marla Daniels assumes no liability in connection with the information provided.

Investing in Second Mortgages

What you need to get started

You will need money to invest.  This can be cash, RRSPs or available funds on a line of credit.  Investing from a line of credit registered against your house is tax deductible.

Who applies for a second mortgage?

People applying for second mortgages are those who otherwise don’t qualify for a regular loan.  This could be people who have rough credit, newly self employed, people with properties that otherwise don’t fit lending guild lines etc.

Criteria for Approving a second mortgage

We rarely invest loans where the total loan to value is over 80% the total value of the property…an example is Mr. Smith’s property is worth $300,000, his first mortgage is worth $200,000 so his second mortgage can’t be worth more than $40,000 totaling 80% the value of his property.  This helps to keep the risk low.

The lender (you) can review the application in full including appraisal, credit bureau, job references etc.

Further we always confirm the first mortgage is in good standing. We always evaluate what the client’s exist plan is…for example, if there are credit issues, we offer credit counseling and an action plan.

What kind of interest can you earn?

We look at the interest rate on a deal by deal basis but generally a second mortgage in today’s market can range from 9% – 19% interest.  On top of this you will generally also earn a lenders fee up front for doing the deal.

Costs associated with the loan

The borrower pays for all legal costs to register the loan as well as appraisals etc.  You could incur costs if the deal were to go into collection but this is usually something you could revamp from the sale of the property, replacement of the loan etc.

For more information, please contact me.

Marla Daniels, Prolink Mortgage (BC) Inc, 250-733-2201

Canadian Mortgage Trends

New Home“Following the spring/summer rate spikes of 2013, homeowners feared that the low-rate ship had sailed. And now, only 6 to 7 months later, the market is again flush with sub-3% mortgages.

“Just yesterday, in fact, Scotiabank launched the lowest mass-market 5-year fixed rate in its history: 2.97%. (Mind you, this is a rate the bank could have marketed last year, had the previous Finance Minister  not suppressed rate competition.)”

Read the full article here.