Real Estate

Structural Changes to House w/ Mortgage

  • Last Updated:
  • Apr 19th, 2020 3:17 pm
[OP]
Jr. Member
Jan 27, 2018
158 posts
114 upvotes

Structural Changes to House w/ Mortgage

Hi, I've googled around but can't seem to find an answer. I feel the experts here can easily answer this.

I want to buy a gutter house, and make structural changes (e.g., remove load bearing walls, dig up basement; obviously w/ city permits). However, can you do this construction w/ a conventional mortgage attached to it? I will find the purchase of the house w/ a conventional mortgage, and then fund the construction myself (e.g., no need for loan on the actual construction).

Thanks!
9 replies
Deal Addict
Jul 29, 2006
4141 posts
969 upvotes
As long as the house is still habitable and you're not tearing everything down then you're fine. Habitable means there is a working bathroom with shower, kitchen, and a bedroom.

You can also have some (depending on the cost of the renovation) rolled into the mortgage by getting a purchase plus improvements mortgage. You'll need 3 quotes from contractors for the work required.
Newbie
Mar 13, 2020
8 posts
22 upvotes
I bought a house and completely gutted it, right down to the studs. A mortgage shouldn't be a problem as long as you remember that the bank will only value the house as the condition it is now. I found insurance to be more of a hassle. I paid cash for the place I bought so I was in a bit of a different position but I remember that every step of the way, I needed to update insurance and send along pictures of all improvements. They required me to provide copies of all permits and inspections.
nx6288 is correct about habitable but occupancy is a bit more complicated. When the building inspector came to do final inspection for us, to grant occupancy, he wouldn't sign off. The spacing of the pickets on the staircase were not up to code and were spaced 1/8th of an inch too far apart. Also there was not a high enough railing on my front porch, it was 1 and 1/4 inch too short. The town made my family move out of the house these things were up to code.
You are not allowed to live in a house being completely gutted until electric inspector and building inspectors sign off on occupancy.
[OP]
Jr. Member
Jan 27, 2018
158 posts
114 upvotes
larry79 wrote: I bought a house and completely gutted it, right down to the studs. A mortgage shouldn't be a problem as long as you remember that the bank will only value the house as the condition it is now. I found insurance to be more of a hassle. I paid cash for the place I bought so I was in a bit of a different position but I remember that every step of the way, I needed to update insurance and send along pictures of all improvements. They required me to provide copies of all permits and inspections.
nx6288 is correct about habitable but occupancy is a bit more complicated. When the building inspector came to do final inspection for us, to grant occupancy, he wouldn't sign off. The spacing of the pickets on the staircase were not up to code and were spaced 1/8th of an inch too far apart. Also there was not a high enough railing on my front porch, it was 1 and 1/4 inch too short. The town made my family move out of the house these things were up to code.
You are not allowed to live in a house being completely gutted until electric inspector and building inspectors sign off on occupancy.
thanks, this was helpful. how long did the process take to gut and rebuild house? did u hire general contractor?
Deal Fanatic
User avatar
Feb 2, 2014
8814 posts
2528 upvotes
Toronto
deepzerg wrote: Hi, I've googled around but can't seem to find an answer. I feel the experts here can easily answer this.

I want to buy a gutter house, and make structural changes (e.g., remove load bearing walls, dig up basement; obviously w/ city permits). However, can you do this construction w/ a conventional mortgage attached to it? I will find the purchase of the house w/ a conventional mortgage, and then fund the construction myself (e.g., no need for loan on the actual construction).

Thanks!
Good chance you will be declined for a standard mortgage if you are doing that much work and lender finds out about it.

They will want you to put it under a construction product.

With a construction loan, they will still lend you money to purchase the property upfront on closing, but it will be at a lower LTV.

Construction loans/progress draws aren't just for ground up building, it's also for substantially renovations (additions, gut jobs...).
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Addict
Jan 15, 2017
3950 posts
3415 upvotes
Share your plans with your mortgage lender as remember, the house and its current value is their security against the mortgage. Lender's don't like it when you do anything with the house to decrease the value of their security - even for a short period of time. Lots of people have started self constructions like this to run into problems and delays and never completely finish. As @CndRealEstateGuy mentioned above, criteria for construction loans are quite different from typical purchases. There is considerable risk with construction loans.
Deal Addict
Jul 3, 2007
3332 posts
3671 upvotes
Toronto
people get mortgages all the time and dont tell the lender what they are doing to the house....

this is the GTA, the majority of people dont play by the "rules"
Deal Fanatic
User avatar
Feb 2, 2014
8814 posts
2528 upvotes
Toronto
Furcorn wrote: What is a "gutter house"?
It either means:

1-He's going to gut the house (remove everything including drywall) and rebuild OR
2-He buying a house made out of eavestrough/gutters
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative

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