Homeowner finance tips for the next great project.
There are plenty of factors to consider when looking to buy or renovate a home. But the first, and probably most important, step should be finding the best way to finance the home purchase or renovation.
For those looking to buy a home, they should be aware of changes to mortgages. For example, the maximum amortization period is now 30 years, down from 35 years. But it’s always best to talk with a mortgage specialist when considering entering the home-buying market. A specialist will help you figure out what you can afford and what your financing options are, and also assist with the pre-approval process. But Craig Bannon, regional manager of mortgage specialists with RBC, says even those who don’t think they will qualify for a mortgage can benefit from meeting with a specialist.
“There are a variety of options for various types of properties and borrowers including low down payment, construction mortgages and many more,” Bannon says. “Focusing too much on the interest rate, rather than the overall solution is a common mistake homebuyers make. All too often, homebuy- ers give more thought to interest rates than the mortgage solution itself. While rates are a valid consideration, the different types of mortgages, their payment structures, terms and flexibility will have a much greater bear- ing on the overall cost of homeownership.”
Bannon adds that once a pre-approval is granted, homeowners should then research down payments, closing costs and their own credit rating. He also suggests they do research into the Nova Scotia Home Builders’ Association and Atlantic Home Warranty program.
Those homeowners looking to renovate also have several financing options. Smaller projects can be financed by credit card or personal savings from Tax-Free Savings Accounts or High Interest Savings Accounts. Larger projects will usually require financing, and like a home purchase, Bannon says it’s best to research your options based on your own financial situation. Common options include a personal loan or a line of credit. A personal loan offers a homeowner a set amount all at once with fixed payment options suited to their budget, where as a credit line provides an amount that can be drawn from whenever it is required, typically at a low interest rate.
However if the project requires access to funds over a longer period of time, he suggests homeowners look into using the equity built up in their home as a cost- effective way to pay for the project. One such option is the RBC Homeline Plan, which is even available to those whose mortgages are paid off.
“It helps protect you from interest rate fluctuations and can help you save thousands of dollars in interest costs over the life of your mortgage, by diversifying your mortgage terms and interest rates,.” Bannon says. “You can access funds as you need them while enjoying the lower interest rates of secured credit. It offers you an overall credit limit of up to 80 per cent of the value of your home.”
There are many options for home- owners to help set their home plans in motion, whatever the product or project, it’s best to talk with the specialists first.