Reno Financing with CMHC
If you don’t have enough money for a 20% down payment on your house purchase, your lender will require that you seek “mortgage loan insurance” through the Canada Mortgage and Housing Corporation (CMHC). This program costs you a bit extra, but it might make it possible for you to get the financing you need. You may also qualify for a program at CMHC called “purchase plus improvements.” It allows you to add the cost of renovations into the purchase price of the home—and use the higher post-renovation value as the value by which to calculate the mortgage amount. This program is limited to renovations that are no more than 10% of the purchase price or current value. There are hoops to jump through with a program like this, but it’s well worth looking into.
Getting Real About Reno Costs
I hate to curb your enthusiasm for fixer-uppers, but you should know that the most expensive fix-it items to crop up may not even be obvious to you at first. Don’t fixate on ugly wallpaper or pink bathroom fixtures. In the grand scheme of renovations, those don’t add up to much because they’re just cosmetic. Remember that if it looks bad on the surface, what’s under the surface is probably far worse. And structural and mechanical systems will cost much more to repair or replace than you might think. The numbers might still work in your favour—but get estimates from reliable contractors and other specialists, and do your number-crunching using realistic figures.
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Reprinted from Realty Check: Real Estate Secrets for First-Time Canadian Home Buyers by Sandra Rinomato Copyright (C) 2009 by Sandra Rinomato. Reprinted with permission of the publisher John Wiley & Sons, Inc.