Home Renovation Mortgages in Alberta

5 Ways To Pay For Your Renovation

1. Use a Home Equity Line of Credit. Typically, you can access up to 80% of the equity in your home. This means that if you own a home worth approximately $400,000, you should be able to access $320,000 of the equity. If you currently still owe $200,000 on your home, you should be able to obtain a home equity line of credit for $120,000. The rate for a home equity line of credit it typically Prime (3.95%) + 0.50%. This can often be structured without touching your current mortgage.
   
   
2. Refinance your home. As with a Line of Credit, when you are refinancing you will be able to borrow up to 80% of the value of your home. The benefit of refinancing over a secondary loan like a Home Equity Line of Credit is that the interest rate is much lower (currently under 3%) your payments will be fixed for the mortgage term. If you are planning a major renovation, we can also structure a "Refinance plus Improvements" which allows us to refinance to 80% of the AFTER renovation price of the home!
   
   
3. Secure a second mortgage. Typically, this is the last option for a home renovation, but in certian circumstances it might be the best way to proceed. A second mortgage leaves your first mortgage in place, which may preserve your mortgage rate and terms. The second mortgage, like the Line of Credit and Refinance, is secured against the remaining equity in your home. Occasionally, second mortgages could go over 80% loan to value and help you secure those additional funds needed!
   
   
4. Use those muscles! Sweat Equity! One of the largest costs in your renovation will be the cost of labour! To decrease the price of your overall project, consider donating some Saturdays and Sundays to help the project along. Make sure that if any permits are needed, ie: building, plumbing, electrical that you hire a professional, but if you're able, painting, changing fixtures and knobs could drastically improve the look at a small cost when done yourself!
   
   
5. Save Money. Yup - that's right - just save and save and save. I'm talking myself out of a job here! You may have to cut back on discretionary purchases and find places to save money here and there for a few months. But when you do that, you will be able to pay for your home renovations in full without borrowing from a lender. The obvious downside to using cash is the fact that you may have to delay your project for several months.

Key Point: If you are refinancing your home to renovate with the intention to sell, it is essential that you speak to a mortgage broker. Refinancing your home into a 5 year, fixed rate mortgage product at a major bank could result in massive payout penalties when you sell your home in 6-12 months.

• Download the 5 Ways to Pay for your Renovation PDF to learn more.

Purchase Plus Improvements Mortgage

A Purchase Plus Improvements Mortgage, allows qualified purchasers to buy a home or condo and include a Renovation Allowance, even with as little as 5% down.

STEP 1: Obtain a mortgage pre-approval from Spire Mortgage Team, to determine your maximum approval amount.

STEP 2: You must find a home and have a general idea of what renovations will be completed at what cost to you. The purchase price plus the renovation cost cannot exceed your maximum approval amount. You will be required to provide the lender with a written quote, outlining the work to be completed and the cost to do it. Pro tip: Do not include chattels, waste costs or demolition in the quote.

STEP 3: Once your offer is accepted we will have the lender approve the mortgage with the cost of the renovations included in the mortgage.

STEP 4: Once you take possession of your home, you can begin the renovations. The Lender will instruct the Solicitor to "hold" the Renovation funds in trust, until the lender confirms the work has been completed.

STEP 5: The lender will receive the inspection report from the appraiser and validate that the work has been completed. They will instruct the lawyer to release the funds to you, so that you are able to pay the contractor.

Download the Purchase Plus Improvement PDF here.

Why Would I Refinance?

We work what feels like our WHOLE lives to pay off our homes. Right? At least 25 or 30 years! Why in the world would we EVER consider taking the equity out of our home? Although refinancing sounds scary, there are so many advantages and opportunities if you have equity in your home. Here are a couple to consider:

Refinance for Renovations. As your home ages, work needs to be done to maintain your investment. A new roof, a new fence or even a furnace that needs updating. These are all necessary evils that come with homeownership. Many of us choose to add a bedroom for a growing family, finish our basements or redo our kitchens to upgrade the home. Again, these are all normal desires that surface over the years as a homeowner. Putting the cost of the renovations on to a line of credit is going to cost you interest between 7-9%.. A credit card? 13-18%. Every day, I meet with clients that feel like they’re running on a hamster wheel paying off excess credit card debt. If you consider refinancing your home instead of using credit cards, you’d be in the range of about 3.50% and the payments are MUCH smaller!

Refinance to pay off excess debt. Sometimes things just get tricky. We need cash quickly and we haven’t had time to research all of our options. This happens more often than you think! If you own a home with equity and you feel like you’ve got some payment piling up, refinancing could be the perfect solution to take some pressure off.

Refinance for investment. Did you know that if you pull equity out of your home and then use that money to invest, either in RRSP’s, Mutual funds, the stock market or even another property, you’re actually able to write off the mortgage interest you’re paying on your principal residence? True story! You can pull equity out (or refinance) your home, invest the money to get it working for you AND end up with a smaller tax bill at the end of the year! Triple win!

Refinance to purchase a Rental Property. In a challenging employment and mortgage environment, Calgarians are finding it harder and harder to purchase their own homes. This creates two opportunities: a buyer’s market, and a strong rental market. The combination makes for an excellent time to purchase investment Real Estate.

Children’s Education? Early Inheritance? FUN FUN FUN in retirement? Another reason you might want to refinance your property as a long-term property owner is to help your children to achieve their goals. Education is incredibly expensive and the barriers to entry with homeownership have never been higher. Refinancing your home as a way to provide early inheritance might be perfect for your family! (And the kids can pay the interest payments! At least that is what I’ll be making my kids do)!! And don’t forget enjoying your life in retirement. A refinance or equity release from your home might be the perfect way to add to your monthly income in retirement.

I know what you’re thinking now, “Okay, okay lady, so what is the process if we actually want to consider this refinance business?”

Step 1: We’ll have a quick call and figure out what your ultimate goals are.

Step 2: We’ll gather the documents. I’m going to need your property tax statement and your most current mortgage statement. I might need employment documents if you’re still working, or your most recent tax returns if you’re not working. It’s that simple!

Step 3: We’ll structure a transaction just for you. Do you want a mortgage payment? Do you want an interest only payment? Do you want NO payments? There are so many choices available with these transactions, we’ll be able to figure out exactly what works best for your specific situation!

Download the Why Would I Refinance PDF here.

SPIRE Flip Program

Landlording is not for everyone. That, we can all definitely agree on.

Despite that, there are lots of ways to take advantage of the opportunities in real estate. Some examples are buy and long term holds (which Renee and I do), vacation properties, partnering as a silent investor, land developments, commercial retail, commercial residential, investing in Real Estate Investment Trusts, in Mortgage Investment Corps, Privately lending your own funds and flips. OHHHHH FLIPS. Everyone loves a good HGTV flip program – don’t we?

Flips are for those that see the value and vison of what a property COULD be. They want to change and renovate the property to be better used. Either as a investment property or as a home for new owners. Sometimes, renovations and be simple things, like paint, flooring and maybe some exterior TLC. Other times, adding a secondary suite, garage or really gutting a property is what’s necessary to reposition the asset and make it more usable for the next home owners or tenants.

Financing these types of projects is not always straight forward. Traditional financing not only requires fancy footwork through many hoops, but can have costly payout penalties when clients sell their renovation projects. Many new “flippers” focus on getting the lowest interest rate for their project and don’t realize that in doing so, they’re strapping the project with high back end costs and payout penalties.

We have access to an amazing flip program through one of our strategic partners. They share the vision of turning the dated homes into a masterpieces with a simple underwriting philosophy. It really comes down to one question - Will the project be profitable?

In the past clients needed to have an excess of cash for the renovations on-top of having 20% down to purchase the property. If they were buying a home worth $400,000, they would need $80,000 for the down payment, plus $100k-$200k for a quality renovation ($250/sqft).

The opportunity cost on these projects was massive! Client would have $200,000 tied up in a single project! This doesn’t allow them to move forward with future projects until the current project is sold. Our program is currently allowing clients to purchase properties with as little as $10,000 down payment.

Here is how the program works:

On all flip deals we require the following details related to the property:

• Purchase agreement
• Renovation budget and details
• a full net worth statement for applicants who are real estate investors.
• Portfolio details (addresses, mortgages, rental income etc.).
• For the first deal, application and credit is required, if you decide to do other deals in the same year, this is not required.

Underwriting Philosophy:

• Is a profitable deal? Profitability is our first underwriting filter, we want our borrower make money?
• We value the property as if completed with the renovations planned, which is why we require the budget and description of renovations.
• We ask for a minimum of $10,000 down. On a rare occasion where we think the profit margin is slim, we may ask for more money down, but we are more likely to discuss with the client why they think the profit is higher than we do, and ensure it is the right investment decision. We would prefer not to help investors do poor deals and risk them losing money as well as ourselves as no one wins and we both lose.
• Max LTV is 80% of the after-repaired value, and minimum down payment is $10,000.
• Clients cover the cost of renovations on their own. In cases where the renovations costs are high, we may consider a draw mortgage for part of the renovation. Usually this is secured by other real estate, or it may be structured more akin to a construction mortgage.
• Client must make monthly interest only payments.

Connect with us if you think that you have a property that will fit this program! We're excited to kick off the HGTV adventure with more of our Spire Mortgage Team clients in 2020.

Download the SPIRE Flip Program PDF here.

SPIRE Flip Analyzer

Download the SPIRE Flip Analyzer here.