There has been a noticeable trend that has appeared over the last couple of months, with some of my clients looking to refinance their homes. Not enough equity to roll all of their debts, and/or to pay for some renovations to take advantage of the “Renovation Tax Credit”, and or rebates through the “Energy Audits”.
Time and time again, we take a deal to approval stage, to only have it undone by a low appraisal.
Everyone some how knows what their neighbor sold his house for, back 4 months ago, and thinks their home is in much better condition, and should therefore be worth $20 - $30K more. Or on the other side of the fence, when a house recently sells for a low price, there is always a story about the previous owners being in financial distress, marital breakdown or an estate sale, so they had to let it go at below market value. Which is further reason to believe that their house is worth $20 -$30K more. The reality is that the appraisers are getting more and more sales to support the fact that the homes have either not gone up, since their last evaluation, or in fact have gone down.
What does this mean for the clients looking to refinance their homes.. Hurry up and get your home evaluated to maximize its borrowing power today.
If you own a home and answer yes to any of the following, you should be looking to “REFI-NOW.”
1. If you owe more the $10,000 in credit cards or on your line of credit.
2. If you have not filed a tax return for the last couple of years, or know you will have a sizable bill for 2009 tax year.
3. There are renovations that are moving up from the “wish list” to the “must be repaired list”. Roofs, Windows, doors, kitchens and Baths… There has never been a better time with the tax credits and rebates to complete these renovations. At these low rates every $1000.00 in renovations carries for as low as $3.40 per month. So that $20,000 kitchen renovation could end up costing you $68.00 per month.
4. You know that your living paycheque to paycheque and do not have the means to save for RESP or RRSP’s.
But some of these clients are the same clients that are running into the challenge of limited equity. So how are we getting some of these deals approved?
REFINANCE PLUS IMPROVEMENTS.
This is actually one of the most powerful tools if a renovation is being planned for the near future on an existing home. Some clients may have heard of “Purchase Plus Improvements.”, a program that will enable immediate renovations to be added to the purchase price of a home. Great if you happen to be buying that house. But what about the other approx 95% of current homebuyers who are not buying or selling?
“Refinance Plus Improvements” is somewhat of an unwritten program, that piggy back’s on the underwriting criteria of the Purchase Plus Program.
In some cases I can increase the value of your home by the cost of the renovation, usually up to 10% of the current value without any problems, anything higher then the 10% is subject to the possibility that the lender may not give you a dollar for dollar increase in value.
This program is excellent for those who want take advantage of the renovation tax credits, and beat the implementation of the HST.
This program can also work for those who are in the position of wanting to sell their home but there is something that is keeping clients from buying. Outdated tiles, roof needs replacing, original furnace, outdated wiring. The “Refinance Plus Improvements” can be used to fix up a home and get it ready for selling.
By creating additional equity in the home, it will allow the existing equity to be allocated strictly for a debt consolidation and then the increased portion will complete that wish list and/or must be repaired list.
Now, you maybe able to renovate and consolidate at the same time.
Best 5 year fixed is still at 3.99% and variable rate is still at PRIME -.10% and holding.
Please keep in mind that rates are subject to change. The 3.99% rate is a quick close rate.
One more quick update, is that TD Bank just announced that they are no longer using the 32% GDS restriction on their applications. Is this a sign that the lenders are loosening up credit, yes and no…. There are already many lenders who have in essence abandoned the GDS ratio limitation. All they care about is the TDS or Total Debt Service ratio. This works well for those clients with no outside debt, it significantly reduces the minimum income to qualify for a mortgage.
But keep in mind TD Bank is still heavily reliant on the client’s beacon score, so if a client has no credit facilities what so ever they still may not qualify for the mortgage.
If you are looking to REFI NOW then do not hesitate to give me a call.
Thanks,
David Kendall
