18 Jul

Financing Options for Homeowner Hoping to Renovate Their Homes

Mortgage Refinancing

Posted by: Krishna Menon

You may be looking to become more energy efficient and save money on your monthly utility bills, expand your family, improve your family’s safety or your home’s resale value, or just give your home a facelift. Whatever your reason for your home renovation, know there are many financial options available to help you finance it.

 

Before You Start

If you’re considering borrow money to finance your reno, it may be a good idea to speak to a mortgage broker first. You need to fully understand your options in order to know how much you can borrow based on a loan pre-approval. Otherwise your financial plan may not be very realistic.

 

Exploring All of Your Options

It’s extremely important that you explore every single one of your options before making a sound final decision with your finances for your home renovation. Here are a few options to consider:

 

  • Self-fund your project. If you’re working on a smaller renovation project, then you may have the financial ability to cover your own costs for materials and labour.
  • Use credit. Another option for smaller renos if you don’t have cash on hand, is to use your available credit to cover costs. However, since interest rates are usually high, you should also have a payment plan in place if you decide to take this route, otherwise it could result in negative impacts to your credit history.
  • Get a personal loan. Bigger renovation project may require a longer period of time in order for you pay it off. If this is the case you can get a personal loan and make monthly payments on the principal amount, plus interest, over a one to five-year term. This is definitely a better route to take than using credit, as interest rates are typically lower.
  • Apply for a personal line of credit. When financing an ongoing or long-term renovation, this is probably the best option for you. You’ll have access to the money you need when you need it. You’ll also receive monthly statements, so it’ll be easier to keep track of your spending for better budgeting. The best part is that a line of credit also has a lower interest rate when compared to credit cards. You’re only charged interest on the funds you use on a monthly basis..
  • Apply for a home equity loan. With this type of financinh you’ll get all of the same advantages that come with a personal line of credit. The only difference is they’ll be secured by the equity in your home. They are very popular due to the fact they are more economical, as they offer better interest rates. They also enable you to borrow up to 80 percent of your home’s value.
  • Refinance your mortgage. If you’re undergoing a major renovation, then refinancing is probably the best option for you. You’re given a longer period to repay with lower interest rates, when compared to both credit and personal loans. Similar to a home equity loan, you can borrow up to 80% of the appraised value of your home
  • Finance your renovation at the time of purchase. If you’re buying a fixer-upper then consider the many advantages of financing when you purchase. This will allow you to the estimated costs of your renovation to your mortgage.

 

Are you considering a home renovation? Speak to a mortgage expert today to explore your options further.

25 May

Mortgage Refinancing: Know Your Costs

Mortgage Refinancing

Posted by: Krishna Menon

One of the biggest reasons that most homeowner consider refinancing is simply to get a lower interest rate. The second is to gain access to their home equity. Although refinancing your home can be a great financial decision it’s not for everyone. You need to know the costs associated with it to ensure it’s right for you.

If you do decide to refinance you’ll be able to access up to 80 percent of the value of your home, minus whatever outstanding balance you may have on your existing mortgage.
Refinancing Options
When it comes to refinancing options you have two options to choose from:

1. Refinancing within your term – to access a lower mortgage rate or gain access to your home’s equity
2. Refinancing at the end of your term – access equity only, since you’re already get a lower interest rate

Regardless of the option you choose, there are many fees that will come up throughout the refinancing process.

Let’s discuss potential fees that you might have to pay in certain circumstances.
Potential Fees
If you’re refinancing within your term and switching lenders at the same time, here are a few costs that you can be facing:

● Mortgage prepayment penalty
● Discharge fees
● Registration fees for your mortgage
● Legal fees (standard mortgages or collateral mortgages)

If you’re refinancing within your term, but staying with the same lender then only a mortgage prepayment penalty, registration fees and standard mortgage legal fees would apply.

When refinancing at the end of your term and leaving your current lender, here are the costs you could be expecting to pay:

● Mortgage discharge fee
● Registration fee
● Legal fees (standard mortgages or collateral mortgages)

When remaining with the same lender, you’d only have to pay the registration fee and legal fees for a standard mortgage.

So, as you can see refinancing at the end of your term is the best option if you want to avoid any prepayment penalties.

Now, let’s break it down by fee to give you a better understanding of each on individually.
Mortgage Prepayment Penalties
Going with a refinancing option that requires you to break your mortgage within your term? You will pay a prepayment penalty, along with the other fees described above. However, be prepared to pay either three months’ interest or the interest rate differential (IRD), whichever is greater, if you have a fixed-rate mortgage. With variable-rate mortgages you’d just pay three months’ interest.
Discharge Fees
To switch lenders and discharge from your current lender, you’ll be required to pay a fee. These rate can vary depending on your province and the lender themself. You could be looking at paying a minimum of $200, up to a maximum of $350.
Registration Fees
You’ll have to pay registration fees no matter what, whether you choose to stay with or leave your current lender. This registration fee is to cover the cost that is associated with removing your mortgage amount from your property title in order to register it with your new mortgage. These fees are set out by the government within your province and are usually around $70.
Legal Fees
Refinancing requires you to speak to a lawyer who specializes in real estate. They will facilitate the whole financial transaction for you and work with your lender. This includes reviewing your mortgage, terms and conditions, handle your new mortgage registration and do a title search of your home or property to ensure there are no outstanding liens. This could cost you anywhere between $700 and $1000.

However, if you’re going to a new lender with a balance on your mortgage of more than $200,000, it’s likely that the new lender may cover these costs. In this case you wouldn’t have to worry about paying them yourself.

10 Apr

Smart Decisions: Why You Should Refinance Your Mortgage?

Mortgage Refinancing

Posted by: Krishna Menon

Just because you already have your mortgage setup doesn’t mean you should just leave it at that. You should always consider if you’re getting the best possible rate and term, especially when your mortgage is up for renewal. So, are you getting the best deal?

You Don’t Have to Wait for Renewal to Refinance

It’s not necessary to wait until maturity though. Refinancing your mortgage at any time can lead to substantial savings throughout the years to come, even with any penalties your lender may charge you for these changes.

How Refinancing Can Help with Debt and Interest Reduction?

If you refinance you can gain access to your home equity, reduce your debt, support life-changing events or finance that home renovation you’ve been dreaming about. The best part, you can do this all at a lower interest rate. The worse thing that can happen in situations like these is missing your mortgage or debt payments due to your inability to manage, thus negatively impacting your credit score.

Having a significant amount of debt can become quite stressful and difficult to manage. At least 10 percent of Canadians choose mortgage refinancing as the best mortgage solution for them, and one of the main reasons was to consolidate debt. You can opt-out by refinancing and this can help to relieve that stress. You’ll then be able to replace your existing mortgage with a new one, that’s most often larger as well. As the borrower, you can can gain access to the difference up to 85 percent, which is a great strategy to reduce debt in Canada.

The Next Steps Towards Refinancing

Research is the next step towards refinancing. You’ll need to determine what the principal balance is on your existing home mortgage. This way you’ll be able to compare it to recent house sales in your area. The average sales price of other homes in your neighborhood can be used as a general indication for your home value as well. So, long as you own more than 20 percent of your home, refinancing could be the way to go.

The second step here is to get your credit into tip-top shape, although you can still refinance with poor credit. Better credit works for you in achieving a better rate.

Next, you’ll need to get all of your documents together, including:

  • Mortgage statements
  • Property tax assessments
  • A letter from your employer
  • Pay stubs
  • Income tax notice of assessment (last 2 years)

Once you’ve gathered all the required documents, then you can focus on learning more about your penalties, new term, new rate and potential savings. Calculating penalties and savings can be complicated since penalties and savings will vary by lender. Your mortgage broker can work with your lender to provide you with these figures.

Don’t wait for renewal to do what’s best for you in the long term, talk to a mortgage professional to find out about low-interest options that alleviate your financial stress and offer you financial freedom down the road.