This mortgage product allows the purchaser of a primary or investment property to add immediate renovation costs onto the new mortgage. The renovations must improve the value of the property such as new flooring, roof, windows, kitchen or bathrooms.
Part of this process includes obtaining a quote/estimation of the cost of the renovation. This can be obtained from a professional contractor or home department store such as Home Depot. This quote/estimation must be submitted with your application to the lender.
Upon closing, the mortgage and renovations funds are sent to your lawyer. The lawyer is instructed to hold back the renovation funds until the work is completed. An inspector from the lender will come out to the property to make sure the work is completed. Typically the client has 60 days to complete the work after closing of the mortgage. Renovations can take longer, which is not a problem however, it is crucial for the client to get the work done in adequate time. Once the inspector signs off on the work the funds are released to the client to cover the cost of the renovations and added to the mortgage by the lender. Please note the borrower must have access to funds to complete the renovations first or have a contractor who will do the work upfront and then get paid once the lawyer releases the funds.
Critical points to note:
- Maximum loan for renovations is $40,000.00
- Available on owner occupied and investment properties
- Available on high ratios and conventional mortgages
- Client receives the same interest rate as with a regular mortgage and if insured the premium is the same. No extra costs.
- A detailed quote/cost sheet for renovations must be submitted with the mortgage approval application.