Phil Moon Son

Renovating or expanding a home is a major disturbance and financing commitment for any homeowner.

Some homeowners have the luxury of personally financing a major renovation project while others require assistance from a bank. David McPherson, owner and operator of McPherson Mortgage Brokers, said "getting financing for a home renovation or expansion construction project is fairly common, however if the home owner plans on doing the project themselves, depending on the size of the project, can cause some financing difficulties."

Most major banks have an approved builders list comprised of contractors from the community. Banks are weary of financing projects with contractors who are not on the approved builders list or cannot get on this list.

A simple information form with references is usually all the information banks need to determine if a contractor can be on the approved builders list.

As for bank financing for major projects, homeowners can either request a line of credit or add the cost of the project to their existing mortgage.

Adding the construction cost of the project to the existing mortgage can be done by what is commonly known as a "construction draw." This process involves a lawyer evaluating progress reports from an certified appraiser prior to making progress payments. The appraiser usually makes three to four progress reports at around $100 a report.

Banks will also require drawings and a quote from a contractor for the construction project, these drawings can range from very detailed to basic, as long as they meet the national building code requirements and the permitting application process with the local municipal office.

In the Winter of 2010, the Canadian Mortgage and Housing Corporation made changes to its policies. Homeowners can no longer refinance more then 90 per cent of the value of their homes even for renovation projects.

The NWT Construction Association also has a list of contractors from the community in regards to home renovation and expansion projects. Renovating or expanding a home usually increases the value of a home while providing years of enjoyment for the homeowner.

Prior to signing contracts with a bank and a contractor, homeowners must do their homework to ensure their check list has been satisfied.

Phil Moon Son is Executive Director of the NWT Construction Association, representing contractors in the NWT and Nunavut. He can be reached via email at director@nwtca.ca.