Mortgage Update: Purchase Plus Improvement

I am often asked: "Can I get some extra money in addition to the mortgage to do a renovations?"

The short answer is YES, you can, but understand how this works. Will you be given a cheque at closing to pay for the renovations? Not quite. Here is how a "Purchase plus improvement mortgage program" works:

• Along with the usual documents required for the mortgage, the Buyer also provides a contractor's estimate
• The lender considers the mortgage based on the value of the home after the renovation is done
• Upon closing the lawyer forwards funds for the purchase price of home. But then...
• The Buyer contracts for the renovation, possibly paying out of her own pocket up front for materials and labour, if required by the contractor
• Once the renovation work is complete, the lender will now send an inspector to confirm that the work has been done according the submitted estimate
• The work is approved, and the lawyer now has permission to release the remaining funds earmarked for the renovation work.

Beware that different lenders implement this process in their own way. Some will require at least 3 contract estimates, some will approve an amount for a renovation that is not exceeding 10% of the current value of the home, some will waive the requirement for inspection if the amount is less than $10,000, and so on and so on.

It's still a great program if you know how to handle it.

This week mortgage rates kept moving down a bit and to my surprise one can now get a variable rate below Prime.

For our best clients we get 3.63% for 5-year closed term and Prime minus 0.10% (2.15%) for a variable rate. Just wondering how long these low rates will last.

With my best wishes for the Thanksgiving holiday...

Vasko DeLev, AMP
Accredited Mortgage Professional
Verico Capital Mortgages Inc.
106 - 18 Deakin St, Ottawa ON K2E 8B7
Email: vasko@CapitalMortgages.com