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Buying a Fixer Upper House?

Here’s how to finance your renovation.

Fixer Upper Home

With house prices still rising, sometimes the only home you can afford is a fixer upper. But traditional financing can sometimes make fixer uppers unaffordable. That’s because you first have to come up with a down payment to qualify for a mortgage for the purchase price. Then as soon as you take possession, you have to qualify for some kind of home improvement loan. Not only is it difficult to qualify for two separate loans at the same time, it also makes buying more expensive.

 

Fortunately, your mortgage broker can offer you an affordable solution. We have access to innovative programs from mortgage insurers like CMHC and Genworth that are designed for just this purpose.

 

Genworth:

  • Suited to borrowers that require improvements to their newly purchased home. The purchase and the improvements are combined into one mortgage and a single advance.
  • Improvements cannot exceed 20% of the initial value of the property or $40,000.

CMHC:

  • Suited to borrowers that would like to purchase or refinance a home, with improvements.
  • The purchase or refinance and the improvements are combined into one mortgage and a single advance.
  • Improvements cannot exceed 10% of the improved value of the property.

 

Required Documents:

  • Estimates will be required for improvements up front on each purchase plus improvements transaction.
  • Improvements must be completed within 120 days at which time an inspection report will be ordered to verify the improvements are complete.
  • The inspection report is to verify that the improvements are complete prior to advancing funds.
  • Note an inspection report is only required for improvements of $15,000 or greater. If improvements are $15,000 and less, then paid invoices will suffice as proof of completion.
  • Improvements must add value to the underlying security to qualify.

Once the mortgage insurer and your lender approve the renovation amount, it’s then added to your mortgage loan. However, you don’t receive the funds until the renovation is complete and has been appraised. This usually means you’ll need a short-term line of credit, which we can also help source for you.  To see whether this type of program can help you affordably turn a fixer upper into the home of your dreams, give me a call. I’ll sit down with you and provide a no-charge analysis of your needs and financial situation. Then I’ll show you several financing options, and help you choose a mortgage strategy that achieves your long-term financial goals. For more information, call me today!

Posted by Elise Hildebrandt, AMP, Mortgage Associate, Broker Lic# 316103 at The Mortgage Centre, Brokerage Lic #315847, Saskatoon.  She has been in the financial industry for 16 years. Please contact her today if you have any questions about your mortgage at www.elisehildebrandt.ca.

   

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