Purchasing a home that requires renovations can be both an opportunity and a challenge. The Purchase Plus Improvements mortgage program in Canada offers a solution by allowing homebuyers to finance both the purchase of a property and the cost of eligible renovations through a single mortgage. Here is what you need to know about this program:
What Is a Purchase Plus Improvements Mortgage?
A Purchase Plus Improvements mortgage enables homebuyers to include the cost of specific renovations into their mortgage, facilitating immediate upgrades to their new home. This approach streamlines financing by combining the purchase price and renovation costs into one manageable mortgage payment.
Key Features of the Program:
Loan-to-Value (LTV) Ratios: Qualified buyers can finance up to 95% of the improved value of a 1-2 unit owner-occupied property. For 3-4 unit properties, the maximum LTV is 90%
Down Payment Requirements: The minimum down payment is based on the improved value of the property. For homes priced up to $500,000, a 5% down payment is required. For properties over $500,000, 5% is needed for the first $500,000, and 10% for the portion above that amount.
Eligible Renovations: Funds must be allocated for permanent improvements that enhance the properties value, such as kitchen remodels, flooring, painting, bathroom upgrades, roofing, or energy-efficient installations. Non-permanent fixtures like appliances are typically excluded.
How the Process Works:
1. Assessment and Quotes: After identifying a property, obtain detailed quotes from licensed contractors outlining the proposed renovations and associated costs.
2. Mortgage Application: Submit these quotes along with your mortgage application to your lender. The loan amount will be based on the property’s value after renovations.
3. Fund Disbursement: At closing, the purchase price is released to the seller. The renovation funds are held in trust and released upon completion of the work, which is typically verified through an inspection.
Considerations:
Completion Timeline: Renovations are generally expected to be completed within a specified period, often 90 to 180 days after closing.
Upfront Costs: Homebuyers may need to cover some renovation expenses upfront, as reimbursement occurs after project completion.
Professional Contractors: Most lenders require that licensed professionals undertake the work to ensure quality and compliance.
The Purchase Plus Improvements mortgage is an excellent option for buyers looking to customize a new home to their preferences without the hassle of securing separate financing for renovations. By understanding the programs features and requirements, you can make informed decisions and turn a potential fixer-upper into your dream home.
For more detailed information, refer to the CMHC Improvement Program and the Sagen Purchase Plus Improvements Program.
Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.
Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.
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