Making your home, your very own is one of the most satisfying tasks you’ll undertake after becoming a new home owner. Perhaps you’ll spruce up the kitchen, add that stylish island you’ve been wanting, to give you extra counter space, take down that wall between the living room and dining room to give your home more of an open concept and bring the ensuite bathroom into the 21st century, getting rid of the stunning pink carpet, you can’t believe was ever installed in the first place. Dreaming up the plans for your renovations is easy, but funding them on the other hand… Can be a little more difficult – especially once you realize the actual cost of the plans you have in mind. So where do you come up with the extra cash if you don’t have a bottomless wallet? Your mortgage might be able to help you out.
If you’ve owned your home for long enough to build up some equity (meaning cash value), refinancing your mortgage to pull out the extra cash needed for your renovations could be a great option for you. This would give you the funding you need to make the changes around the house you’ve been wanting to, while avoiding the need to take out a high-interest loan from the bank.
If you don’t have enough equity available in your home, you might be able to apply for what is a called a refinance plus improvements mortgage. With a refinance plus improvements mortgage, the process of obtaining this type of mortgage is very similar to refinancing your current mortgage but with the benefit of being able to tack on the additional funds needed for your renovations. There are a few rules to follow, though, as there are limitations as to how much additional funding you can secure.
- Your credit must be in good standing.
- You must submit a professional estimate for the work that you are wanting the extra funding for along with your mortgage application
- The extra amount you’re looking to tack on to your mortgage for renovations is limited to 10% of the original value of the home or $40,000.00 – whichever of the two is less.
For example, if your home is currently valued at $300,000.00 the maximum amount you can request in your mortgage application is $30,000.00 – However, if you house is valued at $600,000.00 the maximum you can request is $40,000.00 as 10% of the original value of the home exceeds the $40,000.00 cap.
Deciding the best plan of action to maximize the amount you can be approved for with a refinance plus improvements mortgage, should be discussed with your mortgage lender to make sure you are taking every option and detail into consideration before submitting your application. If you would like to review your own personal mortgage options, to see if a refinance plus improvements mortgage is right for you. Please give me a call at 705-315-0516 and we’ll plan to get together at a time that is convenient for you. Although applying for this type of mortgage can be a little more time consuming, you’ll not only enjoy the benefit of your newly renovated home but you’ll also enjoy the fact that your pocketbook won’t take a big hit from high-interest rates in the long run!