Medicine Hat purchase plus improvements
A current Medicine Hat home owner can borrow against the equity in their home to pay for needed repairs or make renovations, if they have enough equity to borrow against. They might take advantage of a cash-out refinance, take out a second mortgage or make use of a home equity line of credit. Yet all of these options depend on owning your home and having enough equity to borrow against. What can you do if you want to buy a house that needs work or requires some renovations to fit your family? This is where a Medicine Hat Mortgage Brokerage Like Whalen Mortgages Medicine Hat can set you up a purchase plus improvements loan into your purchase mortgage.
A Medicine Hat purchase plus improvement can be added to your new purchase mortgage and has many benefits. It allows you to buy a fixer-upper and turn it into a livable home. This may be the best way to break into an expensive neighborhood. It also lets you buy a starter home and turn it into something that better fits your family. These homes often appreciate faster than brand new homes and existing housing stock in good condition.
The purchase plus improvement loan has a number of restrictions and limitations. You can only use the “plus” or renovation portion of the mortgage to make renovations that increase the value of the home. Making structural repairs like fixing the foundation do not count as they are expected to be in good condition when purchasing the home. Adding bedrooms and finishing the basement count. Putting in a chef kitchen or luxury bathroom also count however adding new appliances will not as the home is expected to have appliances unless it is a new build then the builder can give an appliance credit. Expect to give lenders a list of all renovations the property requires when you apply for the mortgage. This may slow down the closing process, but there is less demand for fixer-uppers, as well. You can speed up this process by asking sellers to give you a list of all required work and then getting quotes from qualified contractors regarding the cost.
Most lenders won’t let you invest “sweat equity” to make repairs. After all, they want to make sure the work is done right, so it must be done by a professional. Some Medicine Hat mortgage lenders will cap the value of renovations the home owner can do, allowing you to use the money to clean up the place and repaint. The work that is done must be up to par and meet permits and standards, install a second bathroom or update the electrical wiring must be to code. Lenders will require inspections before they’ll release the next set of funds. In this regard, a purchase plus mortgage is similar to a construction mortgage. The biggest difference is that it is not a full build but rather a renovation so usually the work must be complete in 90 to 120 days then once an appraiser performs an inspection the funds will be released for the work if the inspection shows all the work is complete and in good shape.
Lenders will generally allow you to put a low down payment on the property, assuming it will be a primary residence. You may be able to put just five percent down. However, this will be five percent of the expected value of the property when it is renovated, not the current low price.
You need to consult with a Medicine Hat mortgage broker like Whalen Mortgages Medicine Hat Team. Most lenders won’t fund the renovation of a fixer-upper home. And most home buyers don’t have enough cash to buy the property and then pay yet again to fix it up. Medicine Hat renovation mortgages have additional restrictions, because they come with additional risk for the lender. This makes it worth your while to let Whalen Mortgages Medicine Hat shop around for a competitive interest rate on a purchase plus improvements mortgage.
Note that a purchase plus renovation loan may let you buy a nearly complete home. You could use the loan to buy a property the builder or the prior home owner needed to update some cosmetic upgrades. You could also buy a one- or two-bedroom dream home and build it out to create the home of your dreams.
This is in sharp contrast with a CHMC loan. These loans typically won’t cover major repairs, even if they are necessary to make the home livable or protect the value of the property. Roof repairs are a classic example of what CHMC loans won’t cover. Instead, they’ll only approve a loan for up to 95 percent of the value of the improved property. The money can only be used for cosmetic issues like repainting and cleaning up the yard.
What can you do if you have owned your home for a while? If you have enough home equity, you can borrow against that to fund the repairs of your current home. You could use a cash-out refinance loan, a home equity line of credit or second mortgage. You may be able to borrow against your current home to pay for the repairs of your future home, as well. Then you only need to take out a mortgage to buy the Medicine Hat real estate you’ll renovate using equity in your current home. Give Whalen Mortgages Medicine Hat a call today to get started!
Example:
| Usual way of financing: | |
| Purchase Price | $300,000.00 |
| Less 5% down payment | $15,000.00 |
| Financing Rquired | $285,000.00 |
| Plus 4% insurance premium | $11,400.00 |
| Total Mortgage | $296,400.00 |
| Mortgage payment @ 3.5% | $1,483.85/month |
| Purchase plus Improvements: | |
| Purchase Price | $300,000.00 |
| Proposed Improvements | $20,000.00 |
| AS IMPROVED VALUE OF HOME | $320,000.00,/ |
| Less 5%of as improved value | $16,000.00 |
| Financing required | $304,000.00 |
| Plus 4% Insurance premium | $12,160.00 |
| Total Mortgage | $316,160.00 |
| � | |
| 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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