Welcome to the new winter buying season. Yes, I know I said the “w-word” already, i.e. winter. If you are thinking of buying a new home for next spring or summer then it’s not a bad idea to plan a little ahead. My next couple articles in the coming weeks will focus on home buying. There are three types of construction and renovations mortgages. First, there is a self-built home where you require multiple cash disbursements, a “turnkey” construction where the home would be built by a certain date with one disbursement and finally a purchase with renovations. This week I’d like to focus on the third type, buying a home and rolling renovations costs into the mortgage.
For example, I had a recent client that bought a home in Vaudreuil-Dorion.This client loved the house but it needed a little TLC in the kitchen and wood floors throughout the first floor. Most bank products of this nature permit you to buy the home and you can make renovations between 5-20% of the purchase amount for a maximum of $40,000. This renovations portion simply gets added on top of the mortgaged amount. If you exceed $40,000 it is still possible to get the funds needed but at that point it is typically seen as a construction loan as the renovations required would be considered major at that point.
It’s also a good idea to be as clear with yourself with what type of renovations you really would like to do and make sure that the money spent actually adds bang and value to the home. This latter point is important.You probably have a pretty good idea of your personality and what your future plans will be. Some clients will make the purchase with renovations with the expectation to hang onto the home for the medium to long term which is fine. However if you are expecting to refinance in the future here is where the value-added will be important.
If you have any specific questions you’d like to discuss in next week’s article please feel free to email me.
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