Financing Your Renovation Project
AS WITH any major purchase, you need to have a plan, you need to know your needs, and you need to understand your responsibilities and your options. YOUR HOME renovation project is very important, not only for your own enjoyment of your home but also because it is recognized universally as good business for increasing the resale value of your home.
IN FACT, you may spend more money on a typical remodeling project than you would buying a car. But most homeowners do even less shopping around for a contractor and less homework on their home improvement financing options than they do when they buy a car. As with any major purchase, you need to have a plan, you need to know your needs, and you need to understand your responsibilities and your options.
TO OBTAIN FINANCING for your remodeling project, you may want to consider a bank loan. You should investigate the different programs banks offer, including interest rates and terms. There may also be important tax considerations that could affect your home improvement budget. For example, some renovation projects may be tax deductible.
START WITH a project budget and review it with every step. Since most home remodeling jobs involve hundreds of details, there are hundreds of opportunities for increased cost. Your budget can be destroyed if these costs get out of hand. You may not be able to plan for and control every cost change, but you can set a realistic budget, with contingencies, and work to keep the project within the budget.
SOME ITEMS to include in the budget are design work, permits, additional living expenses if remodeling requires you to move out, specialty items such as appliances, utility hookups, lighting fixtures, loan fees and special insurance, and a contingency of at least 15 percent of the total cost (for a smaller job or a more complicated project, this amount may need to be higher or lower.
NOW THAT YOU have a better idea what improvements you'll make, a reasonable timetable and a budget in mind, you can approach a bank to request financing. If you know what the banker will need from you to reach a decision on your loan request, and you've prepared in advance, this can be a relatively painless process.
YOU MAY NEED to provide the following to the bank:
- The loan application completed by each prospective borrower, or owner of the property to be improved.
- A copy of the first mortgage or Deed of Trust.
- A copy of the annual mortgage information latter with escrow information and address of mortgage company.
THE BANK will review your credit history and will also need to approve the property value through an appraisal. The bank will also have to approve the contractor you have selected.
This involves more than just asking former customers for references on the contractor. The bank will need to review the contractor's financial statement and also consider the contractor's track record on completing this kind of project. If your contractor is already on the bank's approved list, no additional information need be submitted.
YOU NEED to know that the contractor you select is your decision. Bank approval does not remove your responsibility to carefully select a contractor, nor does bank approval obligate the bank if the contractor fails to complete work on your home. You can help smooth this process if you explain to your contractor what the bank needs and the importance of providing complete information.
REMEMBER THAT your bank will review your contract to protect its own interest. You would be wise to have an attorney review it for you also. The legal fees associated with this are minimal compared to the heartache you may endure from a project gone bad.
Article: Home & Condo Designs , 2000
Mortgage Plus Corporation
Licence #10407Located In: Peterborough, ON
Servicing: Peterborough And Surrounding Area
Phone: (705) 745-7334
Web: www.mortgageplus.ca
Kathy McConnell
Licence #M08001542
E-Mail Kathy McConnell: kmcconnell@mortgageplus.ca
Gary Greer
Licence #M08007414
E-Mail Gary Greer: ggreer@mortgageplus.ca
