Scott: “By not selling your home, you are effectively saving nearly 6% of the value of your home. It’s a rough calculation that assumes about 3% for real estate fees, 2% for transfer taxes, and then 1% for legal fees, penalties, inspections, etc. You can consider the first part of your home renovation as free since moving somewhere else would have cost you about 6% of the value of your home. If your home doesn’t have the correct layout or it’s not feasible to provide the additional space you need in an efficient manner, we will let you know and recommend options regarding a sale versus a renovation.”
Scott: “There are many ways to find the funds to finance a remodel or renovation. Personal interest-only lines of credit are the easiest but most expensive. Another option is to have a secured line of credit against your home, which is typically called a home equity line of credit. This home equity line of credit allows you to have access to funds without paying any interest until you use them, and you only pay interest on the amount that has been advanced. Depending on the size and scope of your renovation, the home equity line of credit tends to be one of the better routes for renovation. The downside of a home equity line of credit is that, generally, you want to be doing it for something that’s short-term in nature because the rate is higher on a line of credit vs. a structured mortgage.”
HELOC: Each banking institution has a different term for its home equity line of credit product, but they’re essentially the same thing: an advanceable line of credit secured by the equity that exists in your current home.
Scott: “The lending rules for this kind of loan are complicated. The home equity line of credit is the hardest to qualify for: there are government guidelines that limit the amount you can borrow on a line of credit to a maximum of 65% of the value of your home. There are ways to unlock up to 80%, but you’ll want to consult your lending professional to access this. As well, not all lenders will consider the future value of your home, and not all lenders allow lines of credit behind an existing mortgage. This is why it’s important to have a lending professional who understands what your goals are. Some homeowners might not be able to qualify for a $300,000 equity loan today, but they might qualify for a $95,000 loan now, and then, with the increased equity of that renovation, they can plan another renovation in the near future.
“We offer planning sessions to our clients so they can have a personalized borrowing plan. In these planning sessions, we talk about the scope and timeline of a project, which helps the homeowners plan for when they want their renovation to happen, whether that’s this year or a few years down the road. When they have a plan, they can choose the right team, the right time, and the right project for their home. Choosing a mortgage broker that specializes in home renovation loans can help you access the funds you need for the renovation you want.”
Scott: “For homeowners coming to us for a formal pre-approval, it’s best that they provide all of their documentation in their planning session. This includes a full and accurate list of debts and current income statements and sources. When we have this information in hand, we can give an accurate pre-approval. You want to have firm numbers when you’re setting up timelines and scope with your builder, so the better data you can provide, the more accurate we can be. Debts like car leases, trailer loans, credit scores, unsecured lines of credit, or cosigned loans for your children or others all affect your borrowing ability, but we can often find solutions for these if we know about them in advance. You don’t want to be in a situation where you’ve made legal commitments to your builder about start dates and budget without knowing exactly what you have access to in terms of funds.
“Mortgage brokers tend to have more flexibility than traditional banks, and when you work with an experienced team with the ability to navigate complex lending rules, you can feel confident in your renovation, knowing exactly how much you can spend to upgrade your home the way you want. Choose a lending professional who can shop the market for the correct lending products to get you unbiased advice and the best value.”
When it comes to home renovations in Greater Victoria, one of the most common questions we hear from homeowners is: “Do I need to hire my own designer, or can you handle the design work too?” The answer at MAC Reno Design-Build is refreshingly simple: whatever works best for you and your project.
Planning a kitchen renovation with MAC Reno Design Build in Victoria? Our kitchen renovation guide covers temporary kitchen setup, meal planning, dining options, and week-by-week expectations.