Refinancing Your Mortgage with Home Equity

MORTGAGE REFINANCING 101 

Refinancing Your Mortgage with Home Equity

re financing mortgage saskatoon

With spring just around the corner you might be thinking about renovating the house, sprucing up the backyard or even purchasing your first cottage. Refinancing your mortgage may allow you to find the money that you need for these aspirations.

The first thing that you have to consider is how much equity has built up in your home since you started paying down your mortgage. Your home equity – your home’s value minus the balance of your mortgage – is available for you to withdraw and invest in a number of ways, including home renovations, additional real estate, post secondary education and much more. Has the property value increased? Decreased? You can obtain a realistic figure by getting a market evaluation on your home. By multiplying your current market value by 80% this should give you an idea of how much you would be able to borrow for your new project.

The second thing is to look at different options when it comes to realizing your goals and every individual situation is different. Some choices that a person can look at are:

  • a new mortgage (the amount of your existing balance plus the amount that you would like to borrow);

  • a home equity line of credit;

  • or a combination of a mortgage and line of credit.

The third step would be to sit down with a mortgage specialist and assess your different needs and that is why we are here to help you answer these important questions. So contact us today and we will help you come up with the best strategy for your lifestyle.

Do you have questions about refinancing your mortgage? Give us a call today at (306) 244-7755 or visit our website at www.www.yourmortgagenow.ca

Add Home Renovations to Your Mortgage

Purchase Plus Improvements

Are you having problems finding the right home? Maybe you have found a great home but the kitchen was outdated. You can stop overlooking these properties. There are mortgage programs available that can help you move into a home with a new kitchen or beautiful hardwood flooring.

Both CMHC and Genworth Insurance offer a program called “Purchase Plus Improvements” which allows you to purchase a home, renovate it and incorporate the cost of the renovation into your new mortgage – for as little as 5% down payment based on the improved value of the home.

These improvements must be permanent to the home or property. For example, new windows, roofing, a new garage, bathroom renovations and kitchen renovations would all apply. A new washing machine or refrigerator would not because it is not a permanent part of the home. Although, a built in range or dishwasher would be eligible because they are permanently attached to the home.

How It Works

Let’s say you were to purchase a home for $200,000 and wanted to do $30,000 worth of improvements, CMHC/GE will insure a mortgage based on 95% of the “improved value”. In this example, your down payment would be 5% of $230,000, or $11,500. This can only be approved if the renovations you make add value to the home. For this example, the insurer and lender would have to agree that the renovations increase the value of the home by $30,000.

When making an offer on a house, make the offer conditional for a longer than normal conditional period, if possible. Borrowers must provide a quote from a contractor, before closing on the house, which is then submitted by your Mortgage Associate, to both the mortgage lender and CMHC/Genworth for approval.

On closing day, the lender will submit the total mortgage amount to your lawyer. The improvement amount is held by the lawyer until the renovations are 100% completed and the added value of the home is confirmed by an appraiser. Since the funds will not be released to you until the work is complete, we recommend that our clients apply for an unsecured line of credit so the initial costs can be paid and work can begin. You also may be able to find a contractor who is willing to be paid for the work upon completion.

The advantages of utilizing the Purchase Plus Improvement Programs are that the cost of the renovations are incorporated in a low interest mortgage.

If you have any questions regarding this topic, please give us a all today at (306) 244-7755 or email us at devinandwes@www.yourmortgagenow.ca.

The Importance of Financing Conditions

 

So you’ve found the condo or house of your dreams and you want to make an offerThe Agreement of Purchase and Sale is the official document that includes the terms and conditions of your offer. Do you need a financing condition?
condition is defined as “a requirement that is fundamental to the very existence of the offer.” A breach of a condition allows the Buyer to get out of the contract and obtain the full amount of the deposit back. There are limitless types of conditions that might be included in an AP&S; one of the most important one to understand is the Financing Condition.
The financing condition protects a Buyer. While the legal wording of the clause may vary, it essentially tells a Seller that your offer to buy their property is conditional on you obtaining financing. A well-worded financing clause will state that the financing you obtain must be “satisfactory to the Buyer in their sole and absolute discretion;” meaning that the terms and conditions of the financing obtained (interest rate, payments, etc.) must be satisfactory to you – not just that you were able to obtain financing from someone at some imaginary rate.
If you buy a property without a financing condition and then realize that you can’t find a lender to lend you the money, you’ve got trouble. Or maybe you find out your credit isn’t as good as you thought it was and the bank is penalizing you by charging you a higher interest rate and you can no longer afford the mortgage payments. A financing condition can protect you from losing your deposit and being sued, by giving you an ‘out’ if you need it. Of course if your offer is conditional on financing, you have a duty to seek financing in good faith (meaning you can’t just change your mind about the house the next day and back out of the deal saying you couldn’t get financing).
Mortgage Pre-qualification vs. Pre-approval
People often mistake being pre-qualified for a mortgage for being pre-approved for a mortgage. Being pre-qualified means that a lender has determined how much mortgage you can afford by looking at how much money you make and what your debts are and applying their fancy ratios. They have not likely confirmed what you’ve told them (with credit checks and employment confirmation letters), nor have they guaranteed you an interest rate or mortgage terms.
Mortgage pre-approvals are in writing – so if you don’t have something in writing (probably valid for 120 days), then you aren’t actually pre-approved. Having a financing condition in your offer gives you the opportunity to confirm everything with your lender and is one of the most important ways of protecting yourself.
These days, banks are often looking to approve people for a mortgage for a particular house – they want to know that the home they are purchasing with you is worth what you paid.  They may order an independent appraisal of the house and will lend you money based on that appraisal. Again, a financing condition can protect you.
Financing conditions generally last for 3-5 days, giving you time to sort out your finances. At the end of that time period, you’ll be asked to sign a ‘waiver’ or ‘fulfilment of condition’ and your offer will no longer be dependent on your financial situation.
If you find yourself in a bidding war or some other high-pressure negotiation where financing conditions aren’t likely to be accepted by the Seller, there are ways of being fully approved by your lender BEFORE you make an offer, thus enabling you to make an offer without a financing condition. A good Realtor and lender can guide you through this process.