Bundling Home Improvements into your Mortgage!

01.10.2015

This is a guest post from Eitan Pinsky – Mortgage Broker. Contact Eitan for all the details, it’s always easier to learn about these things in a personal conversation!

The Vancouver East Side Real Estate Market is one of the hottest markets in the country… Saying that it is difficult to find a home, and then successfully bidding on that home may be an understatement. HOWEVER! Purchasing a home in Vancouver is not impossible – get yourself a good realtor, like the WeLoveEastVan team, and we’ll make sure that you find a great property and are in a position to be successful.

Once you’ve found a great property, you may still need to add some updates: the home may need a new roof and you could really want to update that old kitchen.

Fixing a roof or updating an older kitchen can cost a considerable amount of money, and often needs to be cash rather than another loan. For Buyers who only had enough for a 5% down payment, or other Buyers who stretched themselves to get above the 20% down payment amount (to avoid mortgage insurance), coming up with the funds to re-do parts of your new home can be tough. 

Home Improvement Plan Mortgage

You can be pre-approved for up to $60,000 to customize, improve, or renovate any home, paid for by your mortgage!

The Home Improvement Plan (HIP) Mortgage (also known as a “purchase plus improvements” mortgage) allows you to make your home just right for you, with tailored improvements, renovations or major fixes, immediately after you take possession. 

The major benefit of this mortgage is that it allows you to take advantage of the historically low mortgage interest rates by combining your initial mortgage amount and your renovations costs all in one mortgage.

As an aside, buyers can sometimes be approved for lines of credits to pay for their renovations. A line of credit has two disadvantages. The first disadvantage is that large lines of credits are harder to get approved and your renovation budget may exceed the line of credit approval. Secondly, lines of credit, in almost all circumstances, would have a higher interest rate than your mortgage.

The HIP Mortgage works as follows:

1. You find a home and get an accepted offer. An approval can either be based on your purchase price “as-is” or you can get an approval on the value of the home plus the renovations costs. The HIP Mortgage requires you to get a quote from a contractor or builder equivalent for the work needed to be done. This quote will allow the lender to see what the new value of your property is. Instead of lending you 80% or 95% of the purchase price, the lender will lend 80% or 95% of the purchase price plus the cost of the renovations or quote. New appliances can be included in this quote.

2. Upon completion of your purchase, the lender provides your lawyer with the mortgage funds minus the costs of your renovations.

3. Immediately after you take possession, your renovations will start. 

4. Upon completion of your renovations, the lender will either send a representative to view that the renovations are complete or they may require a paid invoice from your contractor. The lender will then pay you for the renovation costs.

*Yes, you do have to pre-pay your renovation costs and get reimbursed afterwards. There are various ways to go about this if you are lacking the current funds. Please call me with any questions.

Making an Umortgageable Home Mortgageable Again

The HIP Mortgage can, in some cases, help you purchase a home that a lender may not necessary want to give you a mortgage for. Remember knob and tube wiring? How about asbestos insulation? These days, lenders are very weary of properties that have increased risks. You may be very comfortable living in your asbestos-filled home but lenders find that their ability to sell that home (should they have to foreclose on you) is diminished with increased risks. Many lenders are turning their backs on these kinds of properties.

With the HIP Mortgage, a lender will now know that you, as a homeowner, will deal with the risks associated with your property. There is surety that you will fix this problem for yourself. The HIP Mortgage would allow a lender who would not normally lend on a home with knob and tube wiring, or a home that has asbestos in it, to lend on that home, with the caveat that you remove the risk using the HIP Mortgage. It’s a win-win for everyone!

If you have any questions about the HIP Mortgage or home financing in generally, please don’t hesitate to contact me. I’m available now for your home financing needs.

Guest Blog Post Written by:

Eitan Pinsky

Mortgage Broker, Advisor

Cell: 778-990-8950                 Origin Mortgages Dominion Lending Centres

Fax: 604-630-3102                  550 – 2608 Granville Street

[email protected]     Vancouver, British Columbia

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