Lethbridge purchase plus improvements
If you already own your home, it is easy to get a Lethbridge home equity line of credit or other mortgage product to pay for the renovations or repairs on your home. But what can you do when you want to buy a property in need of renovation? This is where Lethbridge purchase plus improvement loans come in.
Lethbridge Mortgage Brokers like Whalen Mortgages Lethbridge offer purchase plus improvement mortgages because they know this may be the only way you could get into a good home. You can buy the house with a purchase plus improvement loan and then use the “plus” amount to finish the basement, add on to the house or make major renovations that increase the value of the home.
A purchase plus improvement loan or renovation mortgage is similar to a conventional Lethbridge mortgage. You’re expected to put at least five percent down. However, this five percent is based on what the house is expected to be worth once the repairs and upgrades are made.
Home improvement mortgages have a number of benefits over the alternatives. A home equity loan simply isn’t an option if you’re putting 5% down on your new home in Lethbridge. A second mortgage isn’t an option, either, because you don’t have enough equity. Unsecured debt has a high interest rate. Another point in favor of home improvement mortgages is that you only have to go through the approval process once. You pay closing costs once and then get both the money to buy the property and renovate it. When you’re shopping for a new home, consider making the purchase of a fixer-upper contingent on receiving a purchase plus improvements loan from Whalen Mortgages Lethbridge. This allows you to afford a fixer-upper and then see the appreciation that comes from the work you put into it. This is especially true if you install an apartment or second living suite, something you can let your grown children or tenants live in.
On the other hand, you may be able to use a renovation mortgage to renovate your current home. It is perfect for those who need to make extensive repairs or want to add onto the house. Instead of taking out a HELOC in addition to your mortgage, you end up with a single monthly payment. The interest rate on the new, larger mortgage is lower than what you’d see on a second mortgage or home equity line of credit.
What are the downsides of purchase plus improvement mortgages? They’re considered higher risk than the average Lethbridge home loan. That’s why relatively few lenders offer them, especially to new home buyers. They may not want to do the necessary inspections and handle distributions of funds as construction progresses. Talk to Whalen Mortgages Lethbridge top mortgage brokers to learn about the Lethbridge lenders who do offer them. You’ll want to shop around, because lenders vary in terms and conditions as well as interest rates. For example, you may be able to find an adjustable rate loan or a fixed rate renovation mortgage. You can compare what you’ll owe in monthly house payments whether you take out a 10, 15, 20 or 25 year mortgage.
Know that most lenders will mandate that the work be done by a licensed contractor. There may be limited exceptions such as letting you make little repairs yourself, while changing to the plumbing, wiring and physical structure must be done by a professional. Get quotes from vetted contractors that you can present to lenders to demonstrate your need for the “plus” portion of the purchase plus improvements mortgage. This may slow down the closing on the property, but recognize that you’ll want this information before you buy the property.
Note that lenders will only pay for renovations that increase the value of the property. This can include replacing worn floors, painting the home renovating the bathroom or kitchen. Their loan will probably not cover luxury upgrades if it does not increase the value. Ironically, a CHMC loan won’t cover repairs that are necessary and would improve the value of the property like replacing an old roof or killing black mold.
What can you do if lenders won’t extend a purchase plus mortgage? You could buy the property with a large cash reserve to pay for repairs. You could pay for the repairs with unsecured debt. If you are able to buy the fixer-upper and then sell your old home, you could use that cash to pay for repairs. Or invest that money in your home and open a HELOC secured by your new Lethbridge home.
What are your options if you’re building a new home? Home builders will get up to four monetary advances to pay for work, while the first draw on the construction mortgage will pay off the land loan and help pay for materials. Purchase plus loans aren’t used in this case, unless you’re buying a home that you’ll be just doing cosmetic upgrades. Yet a purchase plus loan may be an option if you’re buying something that just needs a little cosmetic upgrade to increase the value and marketability of the home. Call Whalen Mortgages Lethbridge today we are your most experienced trusted Lethbridge Mortgage Brokers and pride ourselves in transparency and information. We are here to help you make the home your want to be your dream home.
|Usual way of financing:|
|Less 5% down payment||$15,000.00|
|Plus 4% insurance premium||$11,400.00|
|Mortgage payment @ 3.5%||$1,483.85/month|
|Purchase plus Improvements:|
|AS IMPROVED VALUE OF HOME||$320,000.00,/|
|Less 5%of as improved value||$16,000.00|
|Plus 4% Insurance premium||$12,160.00|
|Mortgage payment @ 3.5%||$1,578.50/month|
In this example, you are able to personalize the home to suit your needs and improve the value of your home, without waiting until you could afford to do the changes.
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