Real Estate

Refinance conditions on money

  • Last Updated:
  • Jul 22nd, 2020 2:20 pm
[OP]
Newbie
Mar 9, 2020
11 posts
1 upvote

Refinance conditions on money

In the process of negotiating a cash-out refinance to 80%. Incumbent lender (my credit union) first asked what I wanted the money for: debt consolidation and renovations. Now they say they want contracts in place prior to approval (4 weeks away to renewal date). I pushed back and was told they have concerns about the projects running out of money prior to completion. We are doing the work ourselves, as we always do, so I suggested perhaps I give them a costed plan. They took issue with purchasing from IKEA, as they will not take drafts, so I would need to pay IKEA out of pocket, only to have the money released once the project was complete! (so, I foot the huge bill until then.)

I am worried that they are trying to run out the clock so they can rake over the coals, and told them I will continue to work with their competitor who did not seek the same restrictions ( a partial bluff, in contact with a broker, but haven't moved far enough along to know what conditions they are placing...)

What is the reasonable course here? I get their worry that I could devalue the property, and will play ball to assuage their concern in that regard. What limits are reasonable for them to place on the releasing of the funds, or outright approval?

I will be moving forward with the broker to hedge, but would rather not move unless needed. What can I push back on, and what should I swallow?
8 replies
Deal Addict
Jul 3, 2007
4056 posts
4537 upvotes
Toronto
easybee wrote: In the process of negotiating a cash-out refinance to 80%. Incumbent lender (my credit union) first asked what I wanted the money for: debt consolidation and renovations. Now they say they want contracts in place prior to approval (4 weeks away to renewal date). I pushed back and was told they have concerns about the projects running out of money prior to completion. We are doing the work ourselves, as we always do, so I suggested perhaps I give them a costed plan. They took issue with purchasing from IKEA, as they will not take drafts, so I would need to pay IKEA out of pocket, only to have the money released once the project was complete! (so, I foot the huge bill until then.)

I am worried that they are trying to run out the clock so they can rake over the coals, and told them I will continue to work with their competitor who did not seek the same restrictions ( a partial bluff, in contact with a broker, but haven't moved far enough along to know what conditions they are placing...)

What is the reasonable course here? I get their worry that I could devalue the property, and will play ball to assuage their concern in that regard. What limits are reasonable for them to place on the releasing of the funds, or outright approval?

I will be moving forward with the broker to hedge, but would rather not move unless needed. What can I push back on, and what should I swallow?
they can do whatever they want, they lend the money..... look for another lender asap.....
Deal Fanatic
Dec 24, 2005
5764 posts
1598 upvotes
it is not your money. it is their money. they can ask what they want

personally this is why i don't deal with credit unions or the shit banks

a normal bank would not ask you for a Dream Board of your goals.

if you're in a position to do so - tell them to pound sand and why. and go to a big 5 bank.
Deal Guru
User avatar
Mar 23, 2008
13006 posts
9961 upvotes
Edmonton
When we bought our house, we got a mortgage from Scotia, with an add-on for renovations. When we were in the "approval" phase (prior to removing the condition on financing), we got a number of quotes/estimates on some of the tasks, like electrical, plumbing, drywalling, as well as cost estimates on the pieces we were doing ourselves. No "contracts" were required, though. And they were clear on the fact that we would pay for things out of pocket, with funds being released in phases. For example, once we had our electrical and plumbing inspections done, we would get that money released. Same with drywall.

And yes, our kitchen came from IKEA, and they had no issues with that. But as with that, we had to pay out of pocket, and collect after the fact.

C
[OP]
Newbie
Mar 9, 2020
11 posts
1 upvote
so it sounds like placing conditions can happen in banks and credit unions alike. Is it possible to find a lender that just gives me the money? Or at least doesn't require a full costing prior to approval?

It is their money, but it's my equity.
Deal Guru
User avatar
Mar 23, 2008
13006 posts
9961 upvotes
Edmonton
easybee wrote: so it sounds like placing conditions can happen in banks and credit unions alike. Is it possible to find a lender that just gives me the money? Or at least doesn't require a full costing prior to approval?

It is their money, but it's my equity.
Sure, you can probably get a B or lower lender to just hand you a bag of cash, but it will cost you more in interest. As has been mentioned, their money, their rules.

From talking to our broker when we did our purchase/renos, things changed in the industry awhile back. Too many people saying they were doing renovations, then bailing out and leaving the banks with a property worth less than the mortgage. It sucks, but this is the reality we live in.

If you want help to find a lender, you might want to start with a location. Province, if nothing else.

C
Deal Guru
User avatar
Feb 2, 2014
10291 posts
2996 upvotes
Toronto
easybee wrote: In the process of negotiating a cash-out refinance to 80%. Incumbent lender (my credit union) first asked what I wanted the money for: debt consolidation and renovations. Now they say they want contracts in place prior to approval (4 weeks away to renewal date). I pushed back and was told they have concerns about the projects running out of money prior to completion. We are doing the work ourselves, as we always do, so I suggested perhaps I give them a costed plan. They took issue with purchasing from IKEA, as they will not take drafts, so I would need to pay IKEA out of pocket, only to have the money released once the project was complete! (so, I foot the huge bill until then.)

I am worried that they are trying to run out the clock so they can rake over the coals, and told them I will continue to work with their competitor who did not seek the same restrictions ( a partial bluff, in contact with a broker, but haven't moved far enough along to know what conditions they are placing...)

What is the reasonable course here? I get their worry that I could devalue the property, and will play ball to assuage their concern in that regard. What limits are reasonable for them to place on the releasing of the funds, or outright approval?

I will be moving forward with the broker to hedge, but would rather not move unless needed. What can I push back on, and what should I swallow?
How much do you need for the renos alone? What are you doing?

If you're doing significant work on their security (the property), of course they will have concerns. If the work is large, lot of lenders will want you take a construction loan.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Member
Jun 6, 2014
300 posts
129 upvotes
Toronto, ON
80% of the property value. Sounds like it's enough to do a tear-down, rebuild. I would see why the bank would want more supporting documents.
Deal Guru
User avatar
Mar 23, 2008
13006 posts
9961 upvotes
Edmonton
icedtea365 wrote: 80% of the property value. Sounds like it's enough to do a tear-down, rebuild. I would see why the bank would want more supporting documents.
The OP is re-financing to 80% to get cash to pay for the renovations AND debt consolidation.

OP, have you considered just getting a HELOC to get access to your 80% equity? If you did that, you could use the HELOC for debt consolidation, renos, or running off to Vegas, and nobody would care.

C

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