Financing a New Ottawa Custom Home/Cottage or Major Renovation – Part 2
Financing a New Ottawa Custom Home/Cottage or Major Renovation
This week we share more of the information you may want to consider when seeking financing for the construction of your own custom home/cottage or major renovation. We spoke with two local mortgage experts, Debbie Davidson, Mobile Mortgage Advisor, CIBC and Pat Kavanagh, Mobile Mortgage Specialist, RBC Royal Bank, to gather some helpful information and tips. Every situation is unique; so this article is meant as general information only and mortgage rules may have changed since publication. For advice specific to you and your financial situation, please consult a qualified mortgage advisor.
Does financing work any differently for a major renovation when compared to a new build?
Financing options are very similar for major renovations. See last week’s blog for a description of financing for new builds. The bank will require detailed plans for construction and before the construction mortgage is approved an appraiser will assess them to determine the expected value of the home after renovations are complete. During the construction process appraisals will be conducted prior to each draw as they are for new custom home builds. A 10% holdback also applies for renovations.
What about using a home equity line of credit?
If you have considerable equity in your current home you can use a combination mortgage/line-of-credit combination product or home equity line of credit to finance a portion of either a new build or major renovation. Particularly if you are downsizing to suit your new empty-nester lifestyle and building a new custom home that is smaller and a lower value than your current home, this can be an excellent option to finance a large portion of the project.
When considering a custom home or cottage project a few years down the road what can clients do between now and then to prepare themselves financially?
It’s not too early to meet with a mortgage expert. They will review various options available and guide you into the next steps. You will then know what you need to do to qualify for a construction mortgage or to finance the project using a home equity line of credit. This is the perfect time to sit down and understand exactly what you have now, identify any shortfalls and develop a plan of action to get you where you want to go. You may need to sell or refinance a property to obtain the necessary funds or you may need to just stay on track with a great savings plan and set up auto deposits to a TFSA. This meeting will provide you with a wealth of knowledge and a better understanding of what is possible.
Next week, our final week of this blog, we’ll discuss how best to prepare for your initial meeting with a mortgage expert and offer some thoughts about the value of architectural design.
If you are embarking on the journey of building a custom home or cottage or you’re considering a major renovation, take a few minutes to chat with Jim Bell. He has over 30 years of experience making dreams come true for hundreds of very satisfied home and cottage owners. He will listen. He will help you to shape your vision. And he will gladly carry the burdens so that your journey is easier every step of the way. If you are ready to discuss financing with a mortgage expert, he can connect you with Debbie or Pat, who will gladly meet with you to discuss the best financing options to achieve your dream. Connect with Jim today!
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