Question:

Dear John, You may be getting this twice, but the web page timed out as I sent my first msg. I am seeking a professional opinion on something before I approach the bank with it. I need cash to address some debt issues and was thinking about refinancing my mortgage. We bought an older home 3 years ago for 95k with 10% down and a mortgage rate of 4.7% which is almost a full point below the bank's best rate today. The gov't assessment at the time was 115k and this year's assessment is 186k. Do you think the bank would renegotiate the mortgage to a higher value and give me the difference if I agreed to pay current interest rates on the mortgage? Two considerations are that my credit rating has been shot and the house would not do well in an appraisal as it is torn apart for renovations. Your thoughts would be greatly appreciated. Eric

Answer:

Hello Eric, Timing is your major issue closely followed by credit. If your home is torn apart due to renovations, the bank may be reluctant to lend you anything until it is put back together or if they do lend you a larger mortgage while it is torn apart, if you are in Ontario or Quebec they will hold back 10-15% of your mortgage advance for mechanic's liens until 45 days after the work is complete. If they choose to do progress advances that adds to the cost as an appraiser is required to visit your property (at your cost) each time a draw is required and the draw money is advanced through your solicitor or notary (additional cost). If it is possible to obtain a temporary `family' loan to complete your home prior to approaching you bank, the bank may be more receptive to your bad credit given the low loan to value ratio on your finished home. If not, there are lenders who will lend to you at higher rates until you re-establish a good credit rating. John Lozinski 613-721-6843 jlozinski@bellnet.ca

Answered By: John Lozinski

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