The Canadian Renovation
Funding Program

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Loan Advisory Service

In 2011, The Canadian Renovation Funding Program was established to oversee the Renovation Co-op’s complex series of Subsidy & Rebate Programs, while providing a free advisory to clients who require financing.

The program consists of an elite team of retired and semi-retired finance specialists, each having their own successful careers within specific areas of Financial Services, including Residential & Commercial Mortgage Financing, Investment Banking, Private Mortgage Financing and Construction Loans.

The program also includes experts from the Insurance and Legal Service Industries, with combined expertise in Real Estate Law, Home & Personal Insurance, Eldercare Law, Immigration, Divorce & Family Law, Bankruptcies and Criminal Law.

By providing such a vast range of financial expertise, The Renovation Co-op helps facilitate the flow of business between its registered clients and member service providers.

Free Loan Advisory Service

Recommendations to Co-op-Approved Brokers & Related Professional Services

The Funding Program has recently introduced a free Loan Advisory Service offered exclusively to registered clients of The Renovation Co-op.

Upon the client’s request, a Program Specialist will identify and recommend a specific, Co-op-Approved Mortgage Broker or other Financial Service Provider who regularly specializes in the type of loan product that best fulfills the client’s requirements.

This targeted “pinpointing” of a broker’s unique experience greatly increases the client’s chances of quickly obtaining the most appropriate type of loan that fits his or her needs, and not the other way around.

Co-op-Approved Brokers

All Co-op Approved Mortgage Brokers are highly-skilled, career-minded professionals, whose customer loyalty and personal dedication will always be directed toward their client, and not the lender.

And, as each of our recommended brokers are self-employed business owners, when it comes to long-term relationship-building it is you (the client) who actually becomes the broker’s “employer.” And the only way for the broker to retain that long-term “employment” with you, is to always act in your best interest…and not that of a bank’s or other institution’s.

Nonstop Learning…

As new mortgage loan products continue to become more complicated, mortgage brokers must always maintain a vigilant, watchful eye over the industry, always seeking opportunities and/or information that may further help their clients obtain the best mortgage rates, terms and loan conditions.

In fact, most Renovation Co-op-Approved Mortgage Brokers have the highest attendance record in the industry when it comes to participating in financial forums and special loan product briefings.

For many typical, “less-engaged mortgage specialists, this effort has become too hard a challenge.

However, The Renovation Funding Program recommends only serious, career-minded mortgage specialists who are already highly motivated to grow and excel within their own professional levels of financial expertise.

Note: As a registered client, you will always have permanent access to this free advisory service, and you will never be obligated to purchase any services offered through The Renovation Co-op.

However, if you purchase a loan (for any purpose), a credit of $10,000 will be deposited into your Renovation Credit Account.

Renovation Credit Accounts



When you first contact The Renovation Co-op, a Renovation Credit Account is automatically created, with a starting balance of “$0“.

Note: The following information can also be found at Subsidy & Rebate Programs

Sample Credit Account:

When you purchase a Co-op-Approved Service (not including Renovations or Architectural Services) a substantial credit will be added to your Credit Account balance.

Examples:

Mortgage Loans

When you purchase any type of mortgage product (eg. Refinancing, Debt Consolidation, Construction Loan, Line of Credit, etc.) through a Co-op Approved Mortgage Broker, a credit of $10,000 will be added to your Renovation Credit Account.

Real Estate Transactions

When you buy or sell your home through a Co-op-Approved Realtor, you will receive a credit of $20,000.

Note: All Renovation Credit Accounts are fully Transferable:

Upon the sale of your home, you may transfer the full balance of your Renovation Credit Account to the next owner, or you may keep the account to use toward future renovation projects at your next property.

The ability to transfer your Renovation Credit Account to a potential buyer of your home provides an attractive, additional feature that may help close the sale.

For further information see Subsidy & Rebate Programs.

Accounting & Bookkeeping Services

When you hire a Co-op-Approved Accountant or Bookkeeper, a credit of $5,000 will be deposited into your Renovation Credit Account

Features of the Renovation Credit System:

* Cumulative Balances:

All credits that are added to your Renovation Credit Account Balance are cumulative and will remain within the account until such funds are eventually applied toward renovation purchases (as per Co-op policy).

* Available for all Projects

Renovation Credit can be applied towards any type of General Contracting or Architectural Project when purchased through a Co-op Member-Contractor or Architect/Designer.

* Transferable Balances:

As mentioned above, you may opt to transfer the balance of your Renovation Credit Account to the next owner, or give it away as a gift to a friend or relative. You will receive a Certificate of Transfer with the person’s name on it (as displayed above).

Sample Estimate:

In the example above, the allowable amount of renovation credit that can be used towards the is 3% of the Final Sale Price.

The standard amount of Renovation Credit that can be used towards any type of project is 2% of the Final Sale Price.

However, The Co-op occasionally provides special Incentive Programs, where a higher percentage of the Final Sale Price can be applied to specific projects such as Kitchens, Bathrooms, Basement Apartments, etc. (as long as there are enough funds are in the client’s Renovation Credit Account).

Applying for a Mortgage…



Introduction…

Over the past 15 years, we’ve had to sit back and watch helplessly as our clients struggled to obtain financing for renovations, which normally requires some form of secured equity financing, including the re-structuring of a mortgage and/or consolidation of debts.

Lately however, mortgage borrowing has become an even more complicated issue than it has been in past years.

And with the dozens of individual mortgage products being constantly introduced by the various types of lenders across Canada such as the Chartered Banks, Credit Unions, “Alt-B” Lending Institutions, etc. it has simply become too difficult for most homeowners to understand or to gain access to what should be their best and most important financial decision, without the help and guidance of a skilled and experienced Mortgage Broker.

Whether you are a first-time buyer, or you need to refinance your existing mortgage, you must first find out what lending options are available before getting yourself “saddled” with the wrong type of mortgage loan, simply because you may feel a certain degree of loyalty toward a particular individual or lending institution, or because its the most “convenient” place to go.

Such short-term thinking can often lead to long-term, negative consequences, and our general recommendation is to ensure that you have examined as many alternatives and options as possible before “taking the plunge.”

To help you make that decision safely and efficiently, The Canadian Renovation Funding Program now offers a free Mortgage Broker Referral Program to all clients.

Stress-Test Lending…

As of January 1, 2018, the major Canadian banks implemented a new, mandatory “Stress Test” approval process (under a new bill referred to as “B-20”), in which borrowers (even those who can afford down payments of 20%) must further show their ability to afford mortgage payments based on a higher, potential interest rate than is stated on the actual mortgage agreement.

In plain words, the banks want to know that their clients will be able to withstand a potential, future increase to the mortgage rate without defaulting on such higher payments.

For example, if a borrower qualifies for mortgage payments based on a 3% rate, they must further qualify to handle payments based on a potentially higher 5% rate.

And although both the initial and long-term effect that this new mandate will have on borrowers remains unclear at this time, it is definitely clear that more creative and accommodating, alternative mortgage lending is starting to become badly needed.

Certainly, new home buyers will feel the brunt of this newly-imposed mandate, especially in major cities where younger applicants must initially be able to afford a much higher down payment, while having to qualify at the current mortgage rate, let alone a “just in case” future rate that would be 2% higher than the current rate

Categories of Mortgage Lending



There are 3 Main Categories of Mortgage Loans:

The five major Canadian institutions (referred to as “The Big Five”) are known as Schedule “A” Lenders. These chartered banks sell Mortgage loans to customers who have A+ to B+ credit ratings, low debt service ratios, and whose total family income meets or exceeds a specific set of guidelines.

For mortgage re-financing purposes, the homeowner’s equity must also fall within a specified, minimum percentage of the home’s appraised value.

Historically, the largest percentage of first-time home buyers have purchased their mortgages through one of the “big five” banks.

“Alt- B” Mortgage Lenders are medium-to-large-scale mortgage institutions that serve those clients who may fall short of meeting one or more specific lending qualifications required by major banks.

These Mortgage lending institutions charge slightly higher interest rates than banks, but normally offer more flexibility within their mortgage lending criteria, approving a wider ranges of self-employed clients and individuals with hard-to-prove income.

“Alt-B” Lenders include Trust Companies, Credit Unions and many variations of private and publicly-traded mortgage firms that are available both locally and across Canada.

As the housing market continues its meteoric rise across the region, fierce competition between each of the five major Canadian banks has never been greater. However, the banks’ loan approval qualifications have also increased.

And while the major Canadian banks have been forced to develop a wider, more inclusive selection of mortgage loan products to better accommodate the changing socio-economic demographics across the nation, they are still limited by their historic intolerance of low-to-moderate risk.

“Alt-B” Lenders fill many of the gaps between major banks and private lenders.

Private Mortgage Loans have become a strategic option for many homeowners who need specific funds for renovations, debt consolidation (where the immediate refinancing of an existing mortgage may be impractical due to high pre-payment penalties, etc.), or where the client’s credit may be an issue.

The Private Mortgage Industry has grown in leaps and bounds across Canada, offering numerous types of more sophisticated lenders ranging from private individuals and small companies (who mainly invest in private 2nd mortgages between $20,000- $50,000), to larger-scale investment firms that offer both private residential and commercial mortgage financing for amounts between $100,000 to over $20 Million.

Private Construction Loans:

These are equity-based loans that are approved by the lender, and  based upon the future value of the home (the home’s approximate, appraised value following the completion of the construction).

Construction financing has always been a high-risk investment for lenders, and remains highly-specialized. Such lending not only requires an experienced mortgage broker with years of construction-related financing, but whose network of private investors include individuals and/or companies who specifically offer such lending.

Private Residential Construction Loans (mainly used for projects such as 2nd-Storey Additions, Rear Extensions, Laneway Houses and Custom Homes) can also be risky for contractors:

Payments to the contractor are disbursed at various stages (“progressive” or “staged payments”) that signify the completion of specific benchmarks reached throughout the entire project. For example: $xxx paid on completion of foundation work, or $xxx paid on completion of framing & drywall, etc.).

Such progressive payments are made upon a series of completed inspections conducted by the lender’s appraiser or other representative, and the timing and coordination of such inspections and payments to the contractor depends entirely upon how well the lender is set up to deal with such issues, which can have a direct impact on the contractor’s cash flow throughout the project.

Of course, this all depends upon the client having hired a more specialized Mortgage Broker, whose network of lenders are already set up to deal with such administrative issues.

If you need a private construction loan…make sure you hire a broker who regularly arranges construction loans!

And although the five major banks, along with many Alt-A Lenders have always included construction loans within their own portfolios of advertised mortgage services, they have remained very “clumsy and disorganized” when it comes to administrating such loans (and they know it!).

In addition, most contractor payment terms and schedules associated with construction loans offered through the banks are often too restrictive and/or impractical for the residential construction industry.

That said, there are dozens of mortgage brokerage firms that claim to provide numerous types of construction loans but again, if the broker is ill-equipped to deal with construction-related lending, both the client and the contractor may find themselves running into serious trouble throughout the course of a major renovation project.

Subsidy & Rebate Programs



Subsidy & Rebate Programs

As mentioned above, The Canadian Renovation Funding Program was primarily created to manage The Renovation Co-op’s various Subsidy & Rebate Incentive Programs.

These unique programs are designed to offset prices, without affecting the quality of service.

Instead of a contractor having to lower his/her price to accommodate a client’s limited budget, the funds for these incentive programs come from separate sources, including the Construction & Financial Service industries, along with a percentage of all monthly membership and administration fees.

For complete details, see Subsidy & Rebate Programs