Purchase Plus Improvements Mortgages

Found the right home—but it needs some work?

A Purchase Plus Improvements mortgage may allow qualified buyers to include the cost of eligible renovations in their mortgage financing instead of having to fund the entire project from savings immediately after taking possession.

Whether the home needs new flooring, a kitchen update, bathroom improvements, a new roof or other value-adding work, the important part is to plan the improvements and the financing before the mortgage is finalized.

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What Is a Purchase Plus Improvements Mortgage?

Instead of arranging a mortgage based only on the purchase price, the lender considers the home together with the proposed improvements and the expected value of the property after the work is completed.

For eligible insured purchases, current mortgage-insurance programs can permit financing based on the home’s as-improved value, subject to the borrower, property, lender and mortgage insurer meeting their respective requirements.

This can be particularly useful when you find a home you like in the right neighbourhood, but would otherwise need to spend a significant amount of cash making it your own.

What Kind of Improvements Can Be Considered?

The improvements generally need to be permanent improvements to the property and acceptable to the lender and mortgage insurer. Depending on the application, examples may include:

✓ Kitchen renovations ✓ Bathroom renovations ✓ Flooring ✓ Roofing ✓ Windows and doors

✓ Heating or mechanical upgrades ✓ Electrical improvements ✓ Basement improvements ✓ Energy-efficiency upgrades ✓ Other approved permanent improvements

Do not assume that every renovation or purchase qualifies. Furniture, appliances and other removable items, for example, may be treated differently from improvements that become part of the property. We should review the proposed work before you rely on it being included in the financing.

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How Does the Process Work?

1. Find the Property

You find a home that works for you, but identify improvements you would like to complete after possession.

2. Determine the Improvements

We establish what work is proposed and obtain the estimates, quotes or other documentation required by the lender.

3. The Lender Reviews the As-Improved Value

The property may be assessed based on its value today and its expected value after the approved improvements have been completed.

4. Complete the Purchase

The purchase closes and you take possession of the home. The lender will provide instructions regarding the approved renovation funds and how they will be advanced.

5. Complete and Verify the Work

After the improvements are completed, the lender may require paid invoices, photographs, an inspection, appraisal confirmation or other evidence before the remaining renovation funds are released.

Talk to Me Before Removing Your Financing Condition

Purchase Plus Improvements financing needs to be structured properly from the beginning. Once a conventional purchase mortgage has been approved and completed, you generally cannot simply decide afterward to add renovation costs to that original mortgage transaction.

If you are looking at a property that needs work, tell me what you have in mind before you make the financing decision. We can run the numbers, determine what documentation is required and decide whether Purchase Plus Improvements financing actually makes sense.

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The Mortgage Should Fit the Renovation Plan

There is more to this type of financing than simply adding renovation costs to a mortgage. We also need to consider the down payment, qualification, expected property value, contractor timing, available cash and the lender’s advance requirements.

My job is to put those pieces together so that you understand how the financing will work before you become committed to the purchase.

Related Information:   First-Time Home Buyers   |   Mortgage Solutions