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5 Apr

Purchase Plus Home Improvements?

Home Tips

Posted by: Matthew J. Charlton

When it comes to shopping for your perfect home, it can be hard to find the exact one ready to go! In fact, most homes come with flaws of a sort whether it is old paint or flooring, outdated fixtures or perhaps more extensive repairs are needed. While some buyers have no issues dealing with these deficiencies in a home or perhaps do not consider them dealbreakers, other house hunters might.

If you’re thinking of purchasing a home that requires improvements, there is a mortgage product known as Purchase Plus Improvements (PPI). This type of mortgage is available to assist buyers with making simple upgrades, (not major renovations where structural modifications are made). Simple renovations include paint, flooring, windows, hot-water tank, new furnace, kitchen updates, bathroom updates, new roof, basement finishing, and more.

If you’re interested in renovating or updating your new home, the Purchase Plus Improvements mortgage might be for you.

The Purchase Plus Improvements mortgage is a great option if you’re interested in incorporating the costs of your home renovation into your mortgage loan. This option allows you to immediately increase the value of your home, receive money to cover renovation costs at a great interest rate, and complete major upgrades right away.

Here’s how the program works:

  • The amount allowed for improvements is typically 10–20% of your home’s purchase price, or up to $40,000. The money must be used for “improvements” or “upgrades”, not necessary repairs like leaks or structural issues. It also must be for something that adds value to the home, such as completing a full bathroom and kitchen renovation.
  • We would need an official quote(s) of all the work that is going to be done upfront, at the time of file submission in order to add the quote(s) to the purchase price to determine the “value” of the home the lender will consider. The down payment is now based on this new higher value. Note: If you have an accepted offer, you may need to request an extension on your Condition of Finance in order for this work to be done.
  • The mortgage is funded based on the contractual price, but the money allocated for improvements is held at the solicitor’s office until the work is complete.
  • The renovations and updates can be done by yourself or a company/contractor, but heavy labour cannot be reimbursed. If you do the work yourself, only the cost of materials is released. If a contractor or company does the work, simply provide the invoice and they will be reimbursed directly for the full amount.
  • An inspection report from an appraiser is required once the project is done so the lender can confirm the completion and acceptable quality of the work done.
  • If the final costs are less than the initial estimate, the leftover money is applied back against the mortgage. This program is available at competitive rates, both fixed and variable.

The main difference between a regular mortgage and a purchase plus home improvements program is the need for quotes. As part of the verification process, I along with the lender will need to see a quote for the work that is planned for the improvements. The quotes will provide us with the cost and plan details required to secure the final approval.

  • The lender will release the full funds directly to the lawyer with instructions to hold onto the portion for improvement costs until the renovations are completed. You would need to pay the contractor(s) and then, once the renovations are complete, and the lender has approved and waived the holdback, the lender will allow the lawyer to release the additional funds.

 

To get started with this type of mortgage program, the first step is to get in touch with me to understand how this mortgage product would apply to your application and specific situation. Understanding what you qualify for and the types of improvements that can be included in the financing, will help you better understand which potential properties might work great for you and how much financial room you have for the cost of improvements.

Learn more about the Purchase Plus Improvements mortgage here.


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