Renovate Without Increasing Your Monthly Payments. This seminar will explain how to finance renovation costs without creating a new monthly payment.
Introduction • Do you have a “WISH LIST” of items you would like to update in your home, if only you had the money to do so ? • How would you like the opportunity to buy that new dream kitchen, finish your basement, or replace all your windows and not increase your total monthly payments? .
Introduction • JUST IMAGINE ---- >>
How is this possible? • January 2001 changes in the CMHC refinancing programs, allows customers to roll the costs of home renovations into their mortgage, to a maximum of up to 90% of the home’s present renovated market value. • At current mortgage interest rates, every $1000 in renovations • cost < $7.00 per month. • But how can I renovate without increasing my monthly mortgage payment ???
How is this possible? • A client purchased this home 2 years ago for $165,000 and put 10% down. Their present mortgage is 150,000, @ 6.75% with 3 years left . Their monthly mortgage payment is $1041.00 Present Value of the home is now $185,000.
How is this possible? • The house is starting to look a little tired but they don’t want to move. • The driveway needs to be replaced - $1200.00 • The roof needs to be re-shingled - $1800.00 • They would like to replace the furnace and add central air conditioning $ 3500.00 • The upstairs carpeting needs to be replaced $3400.00 Total Renovations $9900.00
How is this possible? • Present Mortgage $150,000 • Penalty to get out current mortgage $2,531 • Renovations $9,900 • Legal Fees $ 500 • Your new Mortgage amount $162,931
How is this possible? • New Mortgage Amount $162931 • CMHC Fee 647 • Total Mortgage $163578 • New Payment amount $871.57* * (Based on present Variable Rate Mortgage )
Renovated House with $9900 in renovations. With New Driveway, New Roof, New Furnace, A/C and new carpets. Monthly Payment $ 871.57 Non Renovated House Monthly Payment $1041.00 How is this possible?
What if I don’t have enough equity in my home? • On an exception basis, (I got the very first deal approved in Canada) for this situation. • CMHC will allow the increase in the present value of the home by the cost of the renovations, as long as the home is not being priced well beyond marketability.
What if I don’t have enough equity in my home? • Example • Clients bought a new home for $200,000 with 10% down 2 years ago. They still owe $182,000, their mortgage rate is 7.25% and are paying $1310.13 monthly. • They would like to finish their basement, and build a fence and deck in their back yard.
What if I don’t have enough equity in my home? • To finish the basement Estimated cost $18,000 • To Build a deck. Estimated Cost $5,000 • To Build a Fence Estimated cost $4,000 Total Renovations $27,000
What if I don’t have enough equity in my home? • Current Mortgage $182,000 • Penalty to break current Mortgage $3,412 • Renovation Costs $27,000 • Legal Fees $ 500 • Total Needed for New Mortgage $212,912 • We would indicate the value of the renovated home at $237,000
What if I don’t have enough equity in my home? • We can rationalize the increase in value by the $27,000 in renovations, as well as the 2 years that you have owned the property. • The new mortgage amount of $212,912 would carry for $1134.43 (Based on Current Variable Mortgage Rate). Again lower than previous mortgage payment. $27000 in renovations without increasing your mortgage payment !!!!!!!!!!
What if I don’t have enough equity in my home? • Now, I can’t always renovate without an increase in your mortgage payment. If your previous mortgage rate is the same as the current mortgage rates, and your amortization is already close to 25 years, it is not possible to increase your mortgage without increasing your payment. • However, that increase would still be significantly lower than a separate loan payment to pay for the renovations.
Loan vs. Mortgages for Renovations • Most lenders will provide unsecured loans to pay for renovations, however most of the banks will only accept a maximum 5 years amortization for unsecured loans. This will created a rather large payment to carry a significant renovation. • Let’s compare the same situation as the previous example, $27,000 in renovations.
Loan vs. Mortgages for Renovations • To get a $27,000 unsecured loan, the interest rate would be 8 - 9%, and with the 5 year amortization, (assuming the 9% rate) = $ 558.33 • Plus the previous mortgage payment = $1320.87 • Total Monthly cost = $1879.20 vs • Total monthly payment mortgaging = $1134.43 renovations.
Loan vs. Mortgages for Renovations • The larger monthly payment will be more difficult to qualify for because you will need to have at least $8745 in additional income to qualify for this type of financing. • When people use loans to finance renovations they may find themselves compromising on certain quality, or not completing certain renovations, because the monthly payments are just too high.
Loan vs. Mortgages for Renovations • Do the job right !!!! • Renovate your home the way you want to, with the quality craftsmanship that will last. • Kitchen and Bathroom remodeling pays greatest return on renovation dollars spent.
What do I need to Qualify ? • The qualifying criteria is very specific for these deals. • GDS must be < 32% and TDS <40% • Credit must be good, (They will tolerate some 30 days delinquencies). • Get a written estimate(s) for the work that is being completed if we need to increase the value of the property by the cost of the renovation.
What if I don’t Qualify ? • If you don’t qualify due to excessive debt servicing, (Payments are still too high) we can also incorporate a debt consolidation to help lower your monthly payments. • You would have to have a little more equity in your property in order to make this happen.
What if I don’t qualify ? • CMHC will also allow clients to rewrite their current mortgage to a maximum of 90% of current market value to consolidate debts. • Therefore we can also combine a debt consolidation with renovations to complete what I call “RENOVATE PLUS IMPROVEMENTS”
Renovate and Consolidate. • This example is an actual deal that I funded recently. • Clients were finding it a little difficult to make ends meet. One of the clients had decided to return to Teachers College and pursue her dream to be a teacher. She gave up a sizable 2nd income with doing so. Their home was starting to need a little work, carpets, a new roof, and a new driveway. There was no possibility of paying cash or getting a loan to pay for these renovations, as their credit cards were all at their limits supplementing the loss of income. They were going to sell the home and downsize.
Renovate and Consolidate. • Downsizing seemed to be their only option. • Their home was worth approx $200,000 • $145,000 1st Mtg @ 7.5% 1157.97 p/m • $13,000 Car Loan 265.00 p/m • $10,000 Line of Credit (at limit) 300.00 p/m • $5,200 owing on a Visa 156.00 p/m • $3,300 owning on M/C 110.00 p/m Total Monthly Payment $1,988.97
Renovate and Consolidate. • The Renovations they needed would total $6000.00. • So I structured to deal as follows: • $145,000 Owing on Mortgage • 2718.75 Penalty to get out of current mtg. • $31,500 debts to be consolidated • $6,000 in Renovations • $185,218.75 Needed to Renovate and Consolidate
Renovate and Consolidate. • Now since we are completing $6,000 in renovations it is reasonable to indicate the value of the home has gone from $200,000, to $206,000. • $185218.75 /$206,000 = 89.91% Loan to Value • Therefore we are within CMHC’s guidelines of financing up to 90% of renovated value.
Renovate and Consolidate. • New Mortgage Set Up • $185218.75 • $ 3704.38 CMHC Fee (2.0% based on 90% LTV) • $188,923.13 Total Mortgage
Renovate and Consolidate. • $188,923 would carry for $1006.62 p/m based on the current Variable Rate Mortgage. Previous Total Monthly Payments Without Renovations $1988.97 The New Mortgage Payment $1006.62
Renovate and Consolidate. • With the $982.35 per month lower payment and the home now renovated , these clients did not have to sell their home, and down-size to help make ends meet. • They love how their home looks, and they are now saving $200.00 per month to take their daughter on a vacation.
Conclusion • Thank you for taking the time to view my seminar. • So as you can see, the rules have changed with regards to refinancing your existing property. • If you would like to talk about how I can help finance renovations and or consolidate your existing debts, please give me a call, or send me an email.
Conclusion • DAVID KENDALL • Mortgage Refinance Specialist. • Mortgage Financial Corp • 12 Ray St S • Hamilton, Ont, L8P 3V2 • Phone #(905)336-8448 • Fax # (905)525-9701 • Email email@example.com To view the lowest discounted rates currently being offered :www.burlingtonhomebuyers.com/dkendall/rates.htm