For either a home renovation to your personal residence, or a buy and flip project on a residential property, if you don’t have sufficient lines of credit, credit cards, and cash available, then Toronto home renovation loans are likely what’s going to be required.
A home renovation loan is basically a construction loan in that it is for construction purposes, short term in nature, and has a defined exit strategy to pay back the loan.
If the home renovation loan is for your own residence and the plan is to refinance the overall project into a long term mortgage at the end of construction, then an institutional loan could be an option.
If there is no long term mortgage play for the mortgage lender, then a private mortgage is likely going to be what’s required.
The key for a private mortgage lender is the equity in the project, the project plan and budget, and the as completed appraisal value of the project by a certified appraiser.
If a third party appraisal can show that the property will increase in value at the conclusion of each of the planned draws, then a mortgage can be obtained for refinancing purposes.
This is critical in the case of buy and flip properties where the current condition of the property does not provide enough market value in itself to support getting a mortgage approval for the renovation work.
With third party properties that are going be renovated and sold, the exit strategy is going to be to sell the property off at the end of the project, so its critical for the lender to be comfortable with the projected market value and the amount of time its likely going to take for the sale to occur.
While the money is outstanding, the borrower or builder will have to pay the monthly debt servicing costs, so if the resale period goes longer than expected, the additional interest costs are going to eat into the profits.
If you are in need of a Toronto home renovation loan, give me a call so I can quickly assess your situation and requirements, and then provide relevant renovation mortgage financing options for your consideration.