In a seller’s market like the one we are in now, as a buyer, you have fewer properties to choose from. You may not find exactly what you are looking for, but if you can expand your criteria to include homes that you could renovate to make “just right”, your options will increase.
There are two main obstacles that may impede your ability to mentally process the purchase of a home that needs work – the vision and the financing.
The Vision for the New Space
You may not be able to envision how the space will look and feel. Some brains just aren’t wired for this (my husband’s!!). A good designer can provide 3D colour images of your proposed changes and furniture placement in a room. This helps immensely. Today, there are also many online apps that allow you to take a photo of a space and play around with colour and furnishings yourself.
I provide all my buyers with a 2-hour consultation with one of my favourite designers at no cost (whether or not you are renovating). It’s really important to me that you love the home you move into and picking wall colours, placing furniture and planning the styling of rooms helps you feel at home so much sooner.
Financing a Renovation with a New Home Purchase
How do you get financing to buy a home and renovate it all at once?
In Ontario, there are a few different ways you can finance the cost of home renovations. The right option for you depends on the equity you have in your current home, the appraised value of your home and/or the home you are purchasing, and your overall financial picture.
Many lenders will allow you to refinance your existing home to access equity to complete renovations. There are certain conditions you have to meet in order to qualify. We used this option when we purchased the home we planned to renovate.
A home equity line of credit (HELOC – pronounced hee-lock) provides you with a line of credit that is secured against the equity in your home. You use as much as you need, when you need it, and can pay it back at your own pace. You only pay interest for the money borrowed for the time period that it is borrowed. You can usually access up to 65% of the appraised value of your home, depending on the amount outstanding on the mortgage.
Another option is a purchase plus improvement mortgage. The cost of renovations is rolled into the mortgage. The current ceiling on the renovation portion of this type of loan is $40,000, which today would not cover any major renovation. It would be a great option to do a simple basement finish or a bathroom upgrade. In this case, you will also need to meet certain conditions to qualify.
Other financing options that you may want to examine, depending on your financial situation, include credit cards, personal loans or lines of credit, though these typically have higher interest rates.
Purchasing a home that needs some work can be daunting, but also exciting. You get to personalize your home right at the outset. If you would like to talk about this option, are looking for design on lending information or referrals, or simply want to ask a question, I would love to chat.
I'm Liisa and I love helping people moving to Ottawa make their home purchase and transition smooth and seamless. I also love helping sellers get the most for their Ottawa home. Let me know how I can help you make your real estate dreams come true.
613-898-1184 (call or text)