Using Your Home Equity to Stay Just a Little Bit Longer

CoryVance • Jul 03, 2018

Last month, the article “Can’t find the Perfect Property in Your Price Range” was published on the blog, where the purchase plus improvements program was outlined as a way to buy and renovate a property at the same time. If you are looking to buy a new home, but can’t find something you love, this article is certainly worth a read! But what if you don’t want to move? What if you like the place you’re in, but it could use a few upgrades? Well, here are some ways you might be able to stay, just a little bit longer!

Introducing the mortgage refinance, and the refinance plus improvements. Both products allow you to leverage your home equity for home improvements.

Refinance

If your mortgage balance is less than 80% of your property’s value, then assuming you qualify (given the latest changes to mortgage qualification), you can access the equity built up in your home to that 80% level. Lenders will typically ask what the funds are going to be used for, however you won’t have to prove anything after the fact. You should be able to access up to $200,000. Assuming you have the equity, a refinance is a really great way to access funds for various reasons, here are just a few:

Renovate your house
Consolidate your high-interest debts
Help your children pay for education
Top up your investments
Access money for a downpayment on a vacation property
Start a new business (just don’t quit your day job)
… Or any combination of the above

But what happens if you want to do some renovations to your property, but your mortgage balance is more than 80% of your home’s value? That’s where the refinance-plus-improvements comes in.

Refinance-Plus-Improvements

Although guidelines will vary from lender to lender, the refinance-plus-improvements will allow you to access up to 80% of your property’s existing value, plus the cost of the renovations. Most lenders will consider 10% of the initial value of the home, or $40,000, whichever is less, to be included for renovations. So when you take the existing value of your home and add the suggested cost of the renovations, this becomes the improved value. The mortgage is then based on the improved value, instead of your existing value.

However, the catch here is that the renovations have to increase the value of your home accordingly. And the lender wants to ensure that the renovations have been completed, and the value of the property has been increased before they will actually let you have access to the money. So, although the cost of the renovations can be added to the mortgage, it’s your responsibility to pay for the renovations up front, and once the improved value is substantiated by an appraisal, then the funds will be released from the lawyer’s trust account.

Securing a purchase-plus-improvements is certainly a little more tricky than executing on a refinance, but if you don’t have enough equity saved up, this might just be the product that allows you to access your home equity in order to increase the value of your home, and give you a nicer home to live in. Win win.

If you have any questions about either a refinance or a refinance plus improvements, and what each of these would look like given your financial situation, please don’t hesitate to contact me anytime , I’d love to work with you!

< Older Post Newer Post >

CORY VANCE

403-614-9211

cory@coryvance.ca

What You Need To Know About Online Mortgage Calculators

By Cory Vance • 23 Apr, 2024

You’d think an online calculator is a pretty straightforward device, one that you should be able to place your confidence in, and for the most part, they are. Calculators calculate numbers. The numbers are reliable, but how you interpret those numbers, not so much, especially if the goal is mortgage qualification. If you rely on the numbers from a “What can I afford” or “Mortgage Qualification” calculator without talking to an independent mortgage professional, you’re going to be misinformed. Don’t be fooled. Even though an online mortgage calculator can help you calculate mortgage payments or help you assess how additional payments would impact your amortization, they’ll never be able to give you an exact picture of what you can afford and how a lender will consider your mortgage application. While mortgage calculators are objective, mortgage lending isn’t. It’s 100% subjective. Lenders consider your financial situation, employment, credit history, assets, liabilities, the property you are looking to purchase. Then, they will compare that with whatever internal risk profile they are currently using to assess mortgage lending. Simply put, they don’t just look at the numbers. An online calculator is a great tool to help you run different financial scenarios and help assess your comfort level with different payment schedules and mortgage amounts. However, if you rely on an online calculator for mortgage qualification purposes, you’ll be disappointed. The first step in the mortgage qualification process is a preapproval. A preapproval will examine all the variables on your application, assess your financial situation, and provide you with a framework to buy a property based on your unique circumstance. Securing a preapproval comes at no cost to you and without any obligation to buy. It’ll simply allow you the freedom to move ahead with confidence, knowing exactly where you stand. Something a calculator is unable to do. Please connect anytime if you’d like to talk more about your financial situation and get a preapproval started. It would be a pleasure to work with you.

Understanding the Recent Housing Affordability Measures in Canada

By Cory Vance • 19 Apr, 2024

In recent years, housing affordability has become a significant concern for many Canadians, particularly for first-time homebuyers facing soaring prices and strict mortgage qualification criteria. To address these challenges, the Canadian government has introduced several housing affordability measures. In this blog post, we'll examine these measures and their potential implications for homebuyers. Increased Home Buyer's Plan (HBP) Withdrawal Limit Effective April 16, the Home Buyer's Plan (HBP) withdrawal limit will be raised from $35,000 to $60,000. The HBP allows first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) to use towards a down payment on a home. By increasing the withdrawal limit, the government aims to provide young Canadians with more flexibility in saving for their down payments, recognizing the growing challenges of entering the housing market. Extended Repayment Period for HBP Withdrawals In addition to increasing the withdrawal limit, the government has extended the repayment period for HBP withdrawals. Individuals who made withdrawals between January 1, 2022, and December 31, 2025, will now have five years instead of two to begin repayment. This extension provides borrowers with more time to manage their finances and repay the withdrawn amounts, alleviating some of the immediate financial pressures associated with using RRSP funds for a down payment. 30-Year Mortgage Amortizations for Newly Built Homes Starting August 1, 2024, first-time homebuyers purchasing newly built homes will be eligible for 30-year mortgage amortizations. This change extends the maximum mortgage repayment period from 25 years to 30 years, resulting in lower monthly mortgage payments. By offering longer amortization periods, the government aims to increase affordability and assist homebuyers in managing their housing expenses more effectively. Changes to the Canadian Mortgage Charter The government has also introduced changes to the Canadian Mortgage Charter to provide relief to homeowners facing financial challenges. These changes include early mortgage renewal notifications and permanent amortization relief for eligible homeowners. By implementing these measures, the government seeks to support homeowners in maintaining affordable mortgage payments and mitigating the risk of default during times of financial hardship. The recent housing affordability measures announced by the Canadian government are aimed at addressing the challenges faced by homebuyers in today's market. These measures include increasing withdrawal limits, extending repayment periods, and offering longer mortgage amortizations. The goal is to make homeownership more accessible and affordable for Canadians across the country. As these measures come into effect, it's crucial for homebuyers to stay informed about the changes and their implications. Consulting with a mortgage professional can help individuals explore their options and make informed decisions about their housing finances. If you're interested in learning more about these changes and how they may affect you, please don't hesitate to connect with us. We're here to walk you through the process and help you consider all your options and find the one that makes the most sense for you.