Financing Home Improvements for First-Time Home Buyers
So we’re working with a bunch of first-time buyers and they’re looking at homes at a lower price range and some of those houses need some work. And our buyers may have just saved enough for the down payment. So we asked RBC Mortgage Specialist Tina Hinch.
Are there options for them if they want to do some improvements on the house?
Yeah, we have some available programs, one being our purchase plus improvement, where the client can borrow up to 10% of the purchase price towards renovation costs. Whether it’s new flooring, new painting, or sometimes to replace the kitchen. It’s not structural changes; it would be more cosmetic changes.
When we look at that, it allows clients to roll that amount into the actual mortgage once it’s complete. So it’s important when people want to do that is, whether they have the funds upfront or funds that can be gifted to complete the actual work. Okay. And then once the completion’s there, then that’s where their lawyer would advance that final payment once there’s proof that the work has been completed.
Are there any tips about that? Do they need to do some work upfront to make that happen?
As part of the application, we require quotes from contractors, as we’re looking at sending in that application. So I would say when they’re out with yourself as a realtor, “are these things we want to do?” And maybe when it’s, you’re doing your home inspection or sort of that walkthrough, say, “okay, you know what, let’s get a contractor and see what those quotes are going to look like.” So as a mortgage specialists, we have those up front, and we can submit it simultaneously as the application.
Is there a maximum for an improvement?
Depending on whether it’s a default-insured mortgage or conventional, we have some caps. So it’s just understanding, “okay, what are we looking at putting in there?” Obviously, you can’t go and ask for a hundred thousand dollars. Some caps are available based on a percentage of the purchase price, but there’s also a maximum cap.
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