New Year, new home? As most people make their New Year’s resolutions, they usually resolve to make changes that ultimately improve their mind, body or spirit in some way. Going to the gym more, reducing stress, saving more money, or perhaps being more eco-conscious – these are just some of the standard resolutions we make to improve our lives.
But what about a renovation resolution? Imagine the impact transforming your home could have on your mind, body and spirit? It could be significant.
So why should you consider a renovation resolution in 2020, and how can you fund it?
Why A Renovation Resolution?
First, ask yourself what in your life has changed where you feel that a renovation or even a new home will help you live better?
- Have the kids moved out of the house?
- Is your family growing and you need more space?
- Are there urgent repairs needed?
- Or is it just time to update your aging home?
- Are you on the hunt for a new home in a mature neighbourhood?
Most people can answer yes to one or more of these questions. However, funding it is always the first concern.
Some of you may have savings, some may have equity in your homes, and some may need advice from an expert – a mortgage specialist who can talk to you about adjusting your mortgage to include a new renovation project.
The single most important thing you can do when planning a renovation is build a powerful team of professionals to get you on the right track in the start of your project. These experts include your contractor, your draftsman, your interior designer, possibly your REALTOR, and your mortgage professional.
Every person we meet with chooses a different professional to start their planning with. However, no matter who you start with, it is important that your team is communicating.
Assumptions made by you in regards to your contractor and mortgage specialist can add a lot of unnecessary stress and frustrations. Having your payment schedules laid out in your contract are a must and making sure that these are reviewed with your mortgage specialist so that they align with your financing. Always make sure you have a contingency fund for your project (this especially goes for renovations, as there can be some interesting things hidden in your walls that you will discover).
So what are your financing options?
Jillian Little with CIBC is helping us to explain the options, and how you can make them work for you.
PURCHASE PLUS IMPROVEMENT PROGRAM
- Don’t go looking for homes in your maximum pre-approved range. Look for homes 5-10% under this number so there is room in your financing for improvements. Otherwise save up so that you will be able to afford something in the coming years.
- Make sure your REALTOR understands that this type of purchase is in your interest so that you are not setting closing dates unrealistically short and jeopardizing your financing approval or your ability to choose the right contractor in a short timeline.
- Most builders will require some form of deposit to begin construction whether or not your project has approved financing.
- It’s always great to get a line of credit wrapped up in the purchase plus program to help float through the deposit draw.
REFINANCE PLUS IMPROVEMENT
- When you purchase a home with 5% down it takes on average 10-12 years until there is enough equity in your home to afford a renovation.
- When refinancing you are only able to restructure your loan to 80% loan to value.
HOME EQUITY LINE OF CREDIT
- A flexible, ongoing access to funds at a low interest rate; secured against your home equity.
- You only pay interest on the funds you use.
- There are several flexible repayment options, including the ability to pay as little as interest only.
- It offers an option to combine with a mortgage to benefit from automatic rebalancing, so your available credit increases automatically as you pay down your mortgage.
CONSTRUCTION DRAW MORTGAGE
- You receive short draws of cash at various stages of construction.
- Designed to assist those who already have ownership and require funds to cover immediate construction costs prior to the first construction advance.
- There are several terms to this option, so we recommend speaking with your mortgage advisor.
Planning for a renovation is exciting, and there are many options to help you make that renovation project happen. There may be more options to finance your project than you first thought, so please take the time to find a preferred mortgage partner on your renovation team so you make that resolution happen in 2020!