If you’re like most borrowers, you don’t need to go shopping for a mortgage very often. You’ll likely need home financing only a handful of times in your life and you may not know about the entire suite of specialty mortgage products that are available to you right now. Aside from using an experienced mortgage professional who can offer you a variety of solutions based on your needs, I’ve provided a brief overview of a few of my favourite and less used mortgage financing options below.
Purchase + Improvements
You find the perfect neighbourhood you want to live in and everything you need is close by, but you just can’t find the perfect home for you and your family. One has an awful looking bathroom, another has an outdated kitchen and a third home has no garage. Enter the Purchase-Plus-Improvements mortgage product. This type of mortgage allows you to not only get a mortgage to purchase the home, but also to include any upgrades you want to make in order to turn a “so-so” house into an ideal home by including the costs right into the new mortgage. There are some specific requirements related to this product, so if you’re interested in buying and renovating right away, make sure to have a detailed discussion with your mortgage professional before you write an offer on a home.
Refinance to 95% of your home value
Normally you are restricted to 80% of your home value as a maximum when refinancing your mortgage. The exception to that rule is when a separation or divorce is involved and if one borrower is trying to keep the place, the mortgage insurance companies will work with them to essentially ‘purchase’ the home from the other party. This option is not only available to spouses; some other partnership types may be eligible as well depending on the lender and the situation, including siblings. Also be advised there are a few extra document requirements for this mortgage product, so do your research before you commit to this mortgage solution.
A second mortgage can serve multiple purposes with the most useful being an easy way to access your home equity while leaving your first mortgage financing alone. This can be ideal if you have a large payout penalty on your first mortgage or really great mortgage terms that you don’t want to lose. There are a few different routes you can take to find the best second mortgage product for your specific needs. Look into a home equity line of credit, a secured visa, second mortgages or private financing. Private lenders, although they tend to charge higher rates and upfront fees, have much more flexible qualifying guidelines and this is helpful if you’re in temporary financial distress that requires a short-term financing solution.
Also known as interim financing or bridge financing, this product is specifically suited to borrowers buying a new home with the downpayment to come from the sale of their current home. If the closing date of your old home is after the possession date of your new home, bridge financing covers your downpayment funds for the time between purchase and sale. Usually with an upfront fee and daily interest charges, bridge financing is not free and every lenders guidelines and requirements are different, so be sure you’ve secured a “full” financing approval before you remove the conditions on for your new purchase.
There are enough mortgage lenders in the market to encourage some healthy competition among some of them. If your mortgage is due for renewal and you’re not making any changes to the amount or amortization period, many mortgage lenders are offering a free switch program to encourage you to move your business to them. ‘Free’ meaning you won’t have to pay your typical refinance costs such as appraisal, and/or legal fees. Side note, you will still have to provide some qualifying paperwork, though the appeal lies in minimal costs to you and if your financial profile is strong, you may be able to negotiate terms more favourable than your current lender is offering you.
The five specialty products I’ve just detailed above are only the tip of the iceberg. There are many other combinations and different types of mortgage products at your disposal. Regardless of the mortgage you decide to go with, ensure you read and understand all the terms and details of the approval and ask questions until you’re comfortable with the commitment you’re about to make.