23 May
Considering the current housing market conditions, it is a given fact that houses have become expensive, whether it is a brand new or a century home. It is also true that houses that have been recently renovated sell for a premium price. According to a recent survey, 44% of Canadians have completed their house renovations in the past year or are planning to renovate their house in the near future.
Although many people look to buy fixer-upper, the price of supplies, labour and renovation tools means that the associated costs will be added to their mortgage. It is because of these costs that in some cases homeowners need a helping hand to pay for their renovations and keep their homes habitable and comfortable for living.
What is a renovation mortgage?
As the name suggests, a renovation mortgage is a type of mortgage product in which a loan is secured against real estate for the purpose of renovations. The amount, length, rate, and other terms are dependent on the type of renovation mortgage loan being received by the borrower. Also, in some cases, there are some lenders who are willing to provide a mortgage to borrower with extra funds for renovations when purchasing a new home, however, it is completely dependent on the situation of the home and the willingness of the lender.
Moreover, it is also important to consider the different factors when applying for a renovation mortgage. Some of these factors are the equity in the home, the market value of their home, the borrowerâs financial situation, and some other factors will come into play when applying for a renovation mortgage.
However, the first step is that the borrower must plan and decide on what renovations they want to complete and obtain an estimate of how much the renovations would cost. This will assist them in narrowing down their mortgage financing options and determine whether a renovation mortgage loan would work in their situation.
Benefits of a home renovation mortgage
Although a home renovation mortgage is not the only option to renovate your home, the following are some of the benefits of obtaining this type of mortgage product.
- Lower interest rates
- Lower monthly payments as they get amortized over a longer period
- Access to a higher amount depending on your home equity
Some other options, apart from renovation mortgage, that are available to borrowers are as follows:
- Using your savings to update your home without going into debt
- An unsecured line of credit
- A secured line of credit such as a HELOC
- A personal loan
- A loan from a family member
