Building Improvement into Your Mortgage
When prospective
e home buyers get into bidding wars trying to buy the home of their dreams, it can often price out those with lower incomes or first time home buyers with small down payments. In this type of market, it can be more beneficial to purchase a fixer-upper at a lower initial cost and then renovate the home to increase its value. However, the renovations can also be costly, which deters many buyers from taking on such a big commitment. To assist with the process, the Canada Mortgage and Housing Corporation, which issues government mortgage loans to those with down payments of less than 20 percent, developed the CMHC Improvements Program.
What Is the CMHC Improvements Program?
Under this program, the CMHC allows home buyers to include the costs of renovations into the amount of the mortgage. Qualified borrowers can borrow up to 10 percent of the improved value of the home to cover the costs of the renovations. The upgrades must improve the home itself, so new appliances will not be covered, as you may decide to take them with you if you decide to sell the house.
Benefits to the Home Buyer
This program can be a great option for first time home buyers who cannot afford to make a large down payment and fund renovations at the same time. It is also a great way to quickly build equity in the home, as the home’s value increases as soon as the renovations are complete. By rolling the costs into the mortgage, buyers can take advantage of the low interest rate. This is a much less expensive financing option; funding renovations and repairs with a credit card, personal loan or line of credit will cost the buyer a lot more in the long run as these options come with much higher interest rates. In addition, by increasing the value of the home, the homeowner will make a nice profit when he or she decides to sell the house later on.
Benefits to the Community
This program does not just help the homebuyer; it helps the entire community as well. When the value of one home in a neighbourhood increases, it improves the quality of the area. It can contribute to raising the value of other nearby homes as well. This can help those homeowners afford to make renovations, and the cycle continues.
The process of obtaining a mortgage and purchasing a home can be a daunting one. A qualified real estate agent can help. For all your Edmonton home buying and selling needs, contact Elisse Moreno at HomeTribe. Our talented team is standing by to help get you into your dream home.
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