4 Ways to Refinance A Renovation

When our second child was on the way, my wife and I took a look around and realized we were running out of space.

Our 3-bedroom townhouse would still be big enough for our family, but we wanted room for our guests to stay, a place for the kids to play, and a way to get more use out of our home. So, we looked downstairs and dreamed about finishing our basement.

There’s a problem with renovation projects, though: they’re expensive. Even though we were able to find an awesome contractor, do a bit of the work ourselves, and get deals on some of the components like flooring, the project still cost close to $20,000. And we just didn’t have the money available to pay for the work out of pocket.

Fortunately, we were able to access equity in our home to pay for the job. And whether you’re planning to finish a basement, remodel a bathroom, or finally update your very dated kitchen, you may be able to borrow money secured by your home to do the work.

We didn’t want to borrow tens of thousands of dollars without making sure it was a good investment, so we started by asking our real estate agent to come over and talk about the project with us. She helped us look at comparable homes that had recently sold in our neighbourhood to get an idea of what value we would add by finishing the basement.

Our agent was also able to make recommendations about what potential buyers would look for in a finished basement. For example, she strongly advised we not build out any rooms, but leave the space open and subdivide it with furniture instead. And she was right – the space is bright and open, and we expect to get our investment back when we sell the home.

Armed with the knowledge that our investment was a wise one, we started work on getting financing. We called our mortgage broker and they gave us four options for accessing equity in our home to fund our renovation project:

A new mortgage

In this scenario, we would break our current mortgage and get a brand new one. We would be allowed to take out up to 80% of the value of our home, and we would receive a one-time lump sum amount. We would then make a single monthly mortgage payment based on the new borrowed value.

By getting a new mortgage, we would also be able to access the best mortgage rates at the time.

To get a new mortgage, we would have to qualify just like when we bought our home. We would have to show we could make the new mortgage payments, and all of our other debts, and stay within the maximum debt service ratio.

The downside to this option was that we would have to break our current mortgage and pay a penalty. At the time, we were only about half-way through a five-year mortgage term, and it was going to cost several thousand dollars to break the mortgage. There would also be fees associated with getting the new mortgage set up, including legal fees. For that reason, this option is best explored at renewal time.

A second mortgage

Rather than break our old mortgage and start from scratch, we were also given the option of adding a second mortgage to our home. Just like if we had gotten a new mortgage, the total value of both mortgages could add up to a maximum of 80% of the value of our home. But rather than a single monthly payment, we would repay the second mortgage separately.

Aside from that, all of the rules would be the same. We would have to have the home appraised to prove the value, prove we could pay both mortgages and all our other debts based on our income, and hire a lawyer to register the mortgage and process the transaction.

Like the first option, a second mortgage would allow us to access equity only once. We decided that it wouldn’t be worth the setup costs to get a second mortgage because we were looking for a relatively small amount of money.

A blended mortgage

The third option was really just a combination of the first two. Rather than break our mortgage and get a new one, or get an entirely separate second mortgage, we were given the option to refinance through a blended mortgage.

Essentially, the term and interest rate of the second mortgage would be blended with those of the first mortgage. We also had the choice of whether to blend to term, where the math is done so everything lines up with the end of the original mortgage term, or to blend and extend, where we would commit to a new 5-year term starting from the date our refinance funded.

Just like the other options, the blended mortgage would involve some lawyers, go up to a maximum of 80% of the value of our property, and be subject to our ability to pay the loan.

Blended mortgages are a good option because they allow you to refinance without breaking your mortgage, and you can avoid the complexity of having multiple loans with different rules and payments. They can also help you access lower mortgage rates without breaking your mortgage if rates go down over your mortgage term.

But we thought a blended mortgage would be better suited if we needed to borrow a larger sum of money. Just like the other options, it didn’t seem worth the hassle for the size of the project.

A home equity line of credit

The fourth option we were given (and the one we ended up choosing) was a home equity line of credit (HELOC) that would let us open a revolving line of credit, secured by the equity in our home.

HELOCs work similarly to credit cards. You’re given a credit limit of up to 80% of the value of your home, less the amount owing on your mortgage, and you can make withdrawals and repayments of any amount at any time. The minimum monthly payment is just the interest that’s accrued.

The most appealing part of the HELOC to us is that we could get approved for a much higher credit limit than we needed. Even though we only used it to pay for our basement renovation, we still have a large line of credit that’s available to us if we decide to do other projects.

It wasn’t a limiting factor for us, but it’s also worth noting that HELOCs are easier to qualify for than mortgages because you only have to show you can repay the interest, as opposed to payments of principal and interest combined. But there’s the risk that you can carry a large amount of debt indefinitely, and end up paying a lot more in interest than you would with a mortgage.

In order to get the HELOC set up we had to go through the application process including income verification and an appraisal. We also had to hire a real estate lawyer to process the transaction.

A side note on appraisals – we learned through this process that the appraised value of your home plummets dramatically if there’s ongoing construction at the time of appraisal. They agreed in our case to appraise the home based on the main living area and not consider the basement, but to spare yourself a headache, try to make sure you have your financing in place before starting a project.

A mortgage broker can help

Regardless of how you choose to refinance to fund a renovation project, many of the factors are the same. In all cases, you’ll need to prove you can make payments, go through an application process, and enlist a real estate lawyer. Depending on your income, you might be able to borrow up to 80% of the value of your home in total, including your outstanding mortgage and the amount you borrow for your renovation.

The differences are mostly in the way you combine the loan with your existing mortgage and make payments. You can get a completely new mortgage, add on a second one, blend two mortgages together, or get a line of credit.

Once you’ve talked to your real estate agent about the value of your renovation project, your next call should be to your mortgage broker. They can help you understand your options, work out the amount you would be able to borrow, and get the process started for you.

Whatever your renovation project looks like, you may be able to fund it by refinancing your home. Talk to your mortgage broker to learn about the best financing options for you.

By Jordan Lavin for

Photo by H E N G S T R E A M on Unsplash


How to Save When You’re Planning a Family

Whether you’ve decided to start a family, or a family has just decided to start (hey, things happen), you’re probably worried about money.

They’ll all warn you how expensive diapers are, but they’re really not that bad. I spend about $2 a day to keep my two kids in brand name diapers.

The real expense comes in the form of lifestyle changes. If you live in an apartment or urban area, you might be considering buying a new home. You might need a new car to fit your precious cargo, and all the cargo that comes with it. And childcare is a big expense that can make a dent in any budget.

If you’re planning to take leave from work, all of these big expenses might come up while your income is greatly reduced. In Canada, maternity and parental leave are paid by employment insurance (EI). You’ll get 55% of your regular earnings, but only to a maximum of $547 per week. There’s also the Canada Child Benefit, which pays up to $533.33 per month for children under 6 depending on your income in the previous year.

Start with your budget and saving goals

Yes, it’s expensive; but it’s doable. And you can make it easier on yourself by planning ahead.

Start by writing out a budget. You might find it helpful to divide it by time period, as you’ll have different levels of income and different expenses now, during pregnancy, after the baby comes, and after childcare becomes necessary (typically, but not always, when parents return to work).

This exercise will help you get an idea of how your finances could look over time. It’s also a chance to think through some of the bigger expenses like whether you can get by with your current car, or how much strollers actually cost. Make sure to account for your adjusted income, regular living expenses, and any big-ticket items you think you’ll need.

Once you’ve worked out your budget, it’s time to set some savings goals. Maybe you will have a small shortfall in your budget, and need to save enough to cover the difference. Maybe you have a few large purchases to save up for. Once you factor in your timeline, you can work out how much you need to save on a regular basis to meet your goal. For example, if you have one year to save $1,200, you need to put away $100 a month.

Take advantage of savings programs

Saving money can be difficult, but there are tools you can use to make it easier and help grow your money faster.

The quickest and easiest way to save money is with a high interest savings account. These bank accounts pay much more interest than regular savings accounts, so your money can grow faster. Look for an account that pays a high interest rate (aim for at least 2%), and that doesn’t charge any transaction fees.

If you have more time to save, you might want to look into a guaranteed investment certificate (GIC). These are really safe investments that lock in your money for a set period of time in exchange for a guaranteed payout at the end. They won’t grow as much as some other investments, but the tradeoff is you will know exactly what your investment will be worth. GICs can also help you keep your hands off your money if you’re tempted to withdraw from your savings to pay for other things.

If you’re willing to take some risk, you can also consider investing your savings in other vehicles like stocks and bonds. There are services called robo-advisors that make it really simple and inexpensive to build and manage a well-diversified portfolio. These kinds of investments carry risk and are best used if you have a longer time horizon with which to save.

Many of these investment options are available as tax-free savings accounts (TFSAs). TFSAs allow you to invest your money in a number of ways (including in the markets) without having to pay tax on your investment income. There are some TFSA rules you should be aware of, but if you’ve never opened a TFSA before and you’re not planning to save tens of thousands of dollars, you’re not likely to run afoul of any rules.

Your full financial picture

There are a few other things you can do to get in good financial shape when you’re planning a family.

The first is to sign up for a rewards credit card. Whether you choose travel rewards or cash back, you’ll be able to earn a lot of value in points or cash back by making the purchases you would have anyway –  especially if you’re planning to buy some more expensive items. Just make sure to pay off your balance in full each month, or credit card interest will quickly eat up any value you earn in points.

This is also a good time to check on your mortgage and other lines of credit. Lenders like to see stability, and there’s a chance you could run into problems with your mortgage renewal if your income is lower than when you got your mortgage. Check with your mortgage broker to see if there’s anything you can do now to prepare.

Any savings helps

The most important advice I can give is just to start. Even if you can’t save as much as you think you’ll need, saving a little bit is better than saving nothing at all. Just $20 a week will grow to be worth over $1,050 in one year in a high interest savings account paying 2.30% interest.

It’s easy to start saving money when you’re planning a family. See how your upcoming lifestyle changes will affect your budget, set a savings goal, and start saving money. It’s that simple.

By Jordan Lavin for

Photo by Picsea on Unsplash

TREB February 2018 report

February Sales Down from 2017, But Strong Spring Awaits: TREB

The February data is in for the Toronto real estate market, and the numbers reveal activity continues to decline from last year’s levels; sales have fallen 34.9 per cent and prices 12.4 per cent to an average of $767,818, compared to February 2017.

An Opportunity to Upgrade

However, housing analysts say perspective is important when looking at the shorter-term picture – while the market has softened considerably, it has done so from historically high levels that were considerable unsustainable for many home buyers. In fact, not only is today’s market in much more balanced territory, but month-over-month data indicates this spring season will be as robust as ever.

Lauren Haw, Broker of Record at Zoocasa Realty, says buyers and sellers who focus only on year-over-year market change are in for a shock, as real-time conditions are much more competitive than the numbers let on.

“The numbers continue to show that if you’re focusing only on year-over-year growth, you’ll miss the boat on a rising market,” she says. “We’re in line with other hot markets, like in February 2016 where the average Toronto home price was $719,843 versus $806,494 now. We’re right in line with where a market like Toronto should be.”

And, as steadily rising prices have narrowed the cost gap between condo and detached ownership, Haw says there’s one particular consumer segment set to benefit most – move up buyers.

“It’s a good time to sell a condo and buy a house in the GTA – we know that the condo market was fairly flat in terms of price appreciation for many years, but the gap has narrowed and we’re seeing more of a ‘move-up’ market,” she says. “There was a $432,584 gap between the average condo and semi-detached price in February 2016, and it’s now down to $415,627.”

Check out the infographic below to see how February’s real estate market performance compares annually, and from January.


Market Decline Part of TREB’s Forecast

That the market is off to a slower start is actually in line with Toronto Real Estate Board predictions – new mortgage rules that went into effect on January 1st caused a “pull forward” on would-be January sales, which the board says has contributed to a cooler Q1.

“When TREB released its outlook for 2018, the forecast anticipated a slow start to the year compared to the historically high sales count reported in the winter and early spring of 2017,” says TREB President Tim Syrianos. “Prospective home buyers are still come to terms with the psychological impact of the Fair Housing Plan, and some have also had to re-evaluate their plans due to the new OSFI-mandated mortgage stress test guidelines and generally higher borrowing costs.”

Prices Fall Across Most Home Types

Home prices continued to moderate, with the only increase seen in the condo segment, which appreciated an average of 10.1 per cent, to $529,782. As has been the trend since the implementation of the Fair Housing Plan, detached homes saw the greatest price declines, falling 17.2 per cent to $1,00,736. Semi-detached and townhomes both saw single-digit price declines of 8.6 and 2.9 per cent, to $756,894 and $638,691, respectively.

However, February prices still clocked in 12 per cent higher than in February 2016, “which represents an annualized increase well above the rate of inflation for the past two years.”

Regional Differences

Sales and price fluctuations also differed greatly across the Greater Toronto Area – condos for sale in Mississauga, for example, go for under the GTA average at $411,561, compared to Toronto condos at $570,275, which are priced above. Check out the chart below to view price and sale conditions across the region:


2018 GTA Housing Market

Experts Optimistic About 2018 GTA Housing Market

The first month of 2018 has flown by and with it, an idea of what’s to come for this year’s real estate market. So far, according to January data from the Toronto Real Estate Board, sales conditions are slower than they were this time in 2017 – but experts expect that to change, as prospective buyers take new mortgage rules and rising interest rates in stride.

“As we move through the year, expect the pace of home sales to pick up as the psychological impact of the Fair Housing Plan starts to wane and home buyers find their footing relative to the new OSFI-mandated stress test for mortgage approvals through federally-regulated lenders,” said Tim Syrianos, president of TREB.
Continue reading

What is the IB Program?


IB, short for the International Baccalaureate Diploma Programme, is a 2-year program of study for academically-oriented high school students. It is a rigorous program offered to students entering grades 11 and 12 who are seeking a challenge. The curriculum introduces a higher level of thinking and is designed to prepare these students for university. The IB Program is known mostly for its internationally recognized standards, which allow students to travel abroad and attend schools all around the world, after graduating from high school.
Continue reading

The Best Elementary Schools in the Toronto District School Board


The Best Elementary Schools in the Toronto District School Board

Every parent wants the best for their child, especially when it comes to their education. For this reason, when it comes time to buying a new home, most parents look at what is available within the district boundaries of the best elementary schools. But which elementary schools are the best? Below is a comparison chart for the top five ranking elementary schools within the Toronto District School Board (TDSB), according to the most recent Fraser Reports (2011-2012).
Continue reading

Are Electronics in the Classroom Improving or Hindering Learning?


Are Electronics in the Classroom Improving or Hindering Learning?

There’s a growing trend among the best schools in Toronto: previously tabooed electronic devices are making their way into the classroom. School boards are slowly introducing the use of cell phones, tablets and laptops, by both teachers and students. This year, the Peel District School Board and Upper Canada District School Board are implementing a ‘bring your own device’ policy, which encourages students to bring their electronic devices for academic use in class. However, some educators are still not convinced. In fact, the Elementary Teachers’ Federation of Ontario maintains its stance on keeping mobile devices off and out of sight. So, what’s the right answer? Are electronics improving or hindering our students’ ability to learn?
Continue reading