Purchase Plus Improvements

It’s now much harder to obtain the equity in your home.

You may or may not recall a time when you could refinance your home up to a 95% loan to property value. Example: Property Value = $250,000 Maximum Refinance To = $237,500

Since the sub prime mortgage crisis in the U.S. the Canadian Government has continued to take action to prevent a similar condition here in Canada.

In February 2010 the Government reduced the maximum refinance to 90% loan to property value. Example: Property Value = $250,000 Maximum Refinance To = $225,000

In March 2011 the Government reduced the maximum refinance to 85% loan to property value. Example: Property Value = $250,000 Maximum Refinance To = $212,500

In July 2012 the Government reduced the maximum refinance to 80% loan to property value. Example: Property Value = $250,000 Maximum Refinance To = $200,000.

If you put 5% down on a purchase “today” it is going to be quite some time before you can obtain any real amount of equity in your home. Many people use the hard earned equity in their home for investments, child education, and many times improvements to their home through renovations.

I wanted to illustrate the above point so I completed the chart below.

© Mike Parker.ca

If you take a look at the yellow field you will notice that in this example at the end of a five year term there is only $16,158 available to be taken out from a refinance to 80%.

If you are considering purchasing a property that isn’t exactly the way you want it – maybe it has old carpet and you want to put down hardwood, or maybe the bathroom, and kitchen need to be redone. Why not consider adding these costs to your mortgage upon purchase of the home?

I have access to a mortgage product that will allow you to do this. The additional funds will have minimal impact to your mortgage payment, and interest over the life of the mortgage. Let’s face it wouldn’t we all rather have our home the way we want it today rather then waiting five years or more?

Overview Of Process

You will need to provide a detailed list of improvements, including a copy of contracts outlining the scope of the work and cost estimates.

Copy of building permit if improvements are structural.

An appraisal by an approved appraiser on “current value” of property and “improved value” of property. (This will be a fee you the purchaser would incur – approximately $400)

Lender will advance the entire committed amount of the mortgage to your lawyer. Your lawyer will hold back the cost of the improvements until release of funds is approved. (Work is completed in full and inspected)

I will work with you and guide you through the entire process from the time you want to make an offer or even before with a pre-approval.

Contact me today to discuss.

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