Finding the money for home renovations

Home renovations

Are you living with a circa 1980s-style bathroom, carpet on the floor, cracked tiles, a leaky shower or an old bathtub? Or would you love to upgrade your kitchen or add a new deck to enjoy our beautiful Okanagan summers? How about completing your basement to add a mortgage helper suite?

A recent report determined that 44% of Canadian homeowners have either already completed home renovations in the past year or they’re planning to renovate in the near future.

Perhaps this seems like a daunting proposition as you aren’t sure how you might afford to make these much needed changes, but there are options available.

There are several possible ways that you might finance your home renovations.

• Use your savings

• Use a credit card or an unsecured line of credit

• Home equity line of credit (HELOC)

• A personal loan

• A loan from a family member

These are quick solutions and may work best depending on how extensive and costly your renovations might be or you could perhaps consider a lower cost of borrowing to complete those renovations by obtaining a renovation loan.

Some of the benefits of this type of financing are:

• Lower interest rates

• Lower monthly payments as the loan gets amortized over a longer period

• Access to a higher amount depending on your home equity

• A good option for borrowers who might feel tempted to abuse the flexibility of other home renovation options mentioned above, such as credit lines or credit cards.

You may be tempted to use a line of credit but that may not necessarily be the smartest way to go.

To quote David Chilton, the Wealthy Barber,: “People cannot resist lines of credit.”

“And the worst combination in the country is a line of credit and a home renovation – once they renovate one room, the other rooms pale by comparison, so they go on to the next room and it’s a never-ending cycle of renovation as they get deeper and deeper and deeper in debt,” he added in a speech at a conference of the Canadian Pension and Benefits Institute in May 2011.

If you would like more information about the possible financing options available for your home improvements, please book a time on my calendar for a chat or email [email protected]

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.


The two primary type of mortgages available for vacation properties

Buying a vacation property

I am getting many requests for cabin or vacation home financing. Often these properties will be categorized into "type A" or "type B" in order to determine the available options for mortgages.

So are you dreaming of a summer cottage on the water or a cabin the woods for weekend getaways or to get away from the crowded city? The first step is always going to be a mortgage pre-approval but let’s take a look at some of the options for mortgage financing.

Many are accessing equity in their primary residences to make these purchases but there is also a great insured mortgage program available to make your dream of owning a vacation property a reality with a little as a five per cent down payment required.

Here are the types of properties that can be covered under this program.

Type A Properties:

  • Must be owner-occupied or occupied by an immediate family member
  • Located in good marketable areas with evidence of re-sale demand.
  • The property value must be less than $1,000,000
  • The maximum mortgage amount allowed is $600,000 for most of Canada
  • Maximum of one unit
  • For properties valued up to $500,000 a minimum down payment of five per cent is required.For properties valued over $500,000 and less than $1,000,000 – five per cent down payment is required up to $500,000, with an additional 10 per cent down payment on the portion of the home value above $500,000

As a side note, this program can also have other uses. Perhaps you are considering a place for your children to live while they attend university, a condo in the city to avoid the hectic commute or to help buy a home for your elderly parents who are on a fixed income. This is possible as long as the family members are living there on a rent-free basis.

Type B Properties:

The same details are required for these properties as above except for the following:

  • The property does not need to be winterized
  • Seasonal access is permitted (IE: road not plowed during the winter)
  • A minimum of a 10 per cent down payment is required for these types of properties.
  • Properties located on an island must have year-round bridge or ferry access.
  • The maximum mortgage amount is $350,000.

Most rural properties will require 25-50 per cent down payment so it is important to be aware of the amount required up front.

Up to 95 per cent financing is available for owner occupied properties all across Canada including hotel condo units but these units must be high ratio insured.

There are many financing options available through a wide range of lenders. The requirements for mortgages on secondary and vacation home properties can vary greatly from lender to lender so you will want to make yourself aware of all of the choices available in the mortgage marketplace. You’ll want the best possible financing options for your new real estate investment.

Instead of waiting many years to save enough to purchase a vacation home, you may be able to access the equity in your principal residence to finance the purchase. This involves a cash-out refinance of your property and there again are many options available. Other down payment options may include a second mortgage on your current property, personal savings or gifted funds (Type B property purchases do not allow for gifted down payments.)

Now might be the time to get serious about your dream to own a vacation property. If you would like to explore your options so you can enjoy a new vacation home this summer please give me a call to discuss at 1-888-561-2679 or you can book a time to chat about the possibilities here on my calendar.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

The lowdown on reverse mortgages

What is a reverse mortgage?

A reverse mortgage is a way for homeowners 55 or older to turn up to 55% of the value of their home
into tax-free cash.

It’s a loan secured against the value of the home, but unlike a traditional home equity line of credit or a
conventional mortgage it does not require monthly mortgage payments for as long as you live in your

What can you do with a reverse mortgage?

  • Pay off debts
  • Renovate or make your home more accessible
  • Handle unexpected expenses
  • Help your children or grandchildren
  • Improve your day-to-day standard of living
  • Make a special trip or purchase
  • Purchase a new home

Reverse mortgages have come a long way. They have evolved from a needs-based product to a solution
that many financial planners recommend as an important component of a comprehensive retirement

Unfortunately, there are still many misconceptions regarding reverse mortgages. Below, the myths are
separated from the facts.

Myth: The bank owns the home.

Fact: You always maintain title ownership and control of your home, and you have the freedom to
decide when and if you’d like to move or sell.

Myth: You will owe more than your home is worth.

Fact: Clients can qualify for up to 55% of the appraised value of the home, 33% on average. As the
lender has conservative lending practices, you can be confident that there will be equity left in the home
when the loan is repaid. In fact, over 99% of Reverse Mortgage clients have equity remaining in the
home when the loan is repaid.

Myth: A reverse mortgage is a solution of last resort.

Fact: Many financial professionals recommend a reverse mortgage because it’s a great way to provide
financial flexibility. Since it is tax-free money, it allows retirement savings to last longer.

Myth: You cannot get a reverse mortgage if you have an existing mortgage.

Fact: Many clients use a reverse mortgage to pay off their existing mortgage and other debts, freeing up
cash flow for you to use as you wish. How great would it feel to be free of regular mortgage payments?
It is also important to know these two key points.

  • You will remain the owner of your home and will never be asked to move or sell your home
  • provided you pay your property taxes and home insurance and keep your property well
  • maintained.
  • A reverse mortgage WIIL NOT affect any government benefits you may receive such as OAS, CPP
  • or GIS.

A no obligation assessment is available to determine if a reverse mortgage is a suitable option for you.

As a mortgage broker my advice is impartial and I will assist you to review all of the mortgage options
available to you. I am a Certified Reverse Mortgage Expert so I can confidentially review the pros and
cons for your individual situation.

It only takes about 90 seconds for the assessment so please give me a call at 1-888-561-2679 or email
[email protected]

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.


Two types of variable rate mortgages

Rising mortgage payments

Do you have a variable rate mortgage?

Did you know that not all variable rate mortgages are equal?

One is a variable rate mortgage and the other is an adjustable rate mortgage or ARM. It’s important to know the difference when you commit to a mortgage product with a lender.

Many don’t realize that there are two different types of mortgages with floating rates. Both are commonly referred to as “variable rate” mortgages but they actually are not the same.

The type of floating rate mortgage you have will depend on which lender holds your mortgage. When the Bank of Canada adjusts the prime lending rate, the rate on your mortgage will change accordingly.

The Bank of Canada doesn’t just decide to raise or lower interest rates on a whim. It has eight scheduled interest rate announcements a year. If the Bank of Canada changes interest rates, that’s when it can affect you if you have a floating rate mortgage.

Here are some of the differences between the two.

Adjustable Rate Mortgage

The interest rate floats with the prime rate but the monthly payment will change as rates rise or fall. The amortization of your mortgage (how long it takes to pay it off) will not change.

There are pros and cons to an adjustable rate mortgage. You are forced to pay down your mortgage within the same timing you originally committed to with your lender. The downside is it can be difficult from a budgeting perspective if your mortgage payments keep increasing.

Variable Rate Mortgage

The interest rate floats with the prime rate but the monthly payments will remain the same unless interest rates rise to the point where you are no longer covering the required interest payments on the mortgage. The amortization of your mortgage will increase with rising rates and decrease if interest rates go lower than when your mortgage payment was originally set meaning you could pay off your mortgage sooner but conversely it could take you longer to pay off your mortgage and cost you more in interest charges.

We are currently in a rising rate environment, with the Bank of Canada raising rates 0.25% in March, 0.50% in April, 0.50% in June and a historical increase of 1% in July. No one has a crystal ball but we fully expect to see another 0.75% on Sept. 7, again on Oct. 26 and then again on Dec. 7.

Those who are currently in an adjustable rate (ARM) will face a 4.50% increase in their mortgage rates if this happens, with payments increasing accordingly.

Are you concerned about your mortgage payment rising further?

There’s another option rather than locking into a (higher) fixed rate, an option that creates a static payment for five years with no further payment increases.

If you are currently in an adjustable rate mortgage and you would like to schedule a review of your options, please schedule a time to chat here on my calendar. www.calendly.com/april-dunn I’m happy to review possible options with you.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

More Mortgage Matters articles

About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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