8 Jul

Purchase Plus Improvements Mortgage

General

Posted by: Maria Solverson

Fixer-uppers come at great prices. But let’s face it—updating a home can carry a hefty price tag.

Thankfully, a Purchase Plus Improvements Mortgage allows you to roll renovation costs into your mortgage with as little as 5% down.

One easy-to-manage loan package

Purchase Plus adds the cost of renovations to your home’s purchase price, creating one manageable loan. Essentially, you borrow money for your home improvements and pay it back as you pay down your mortgage.

Purchase Plus is a particularly great financing option when mortgage rates are low. This is because you benefit from lower interest rates while investing in your home’s resale value.

Eligibility and requirements

Whether you are tackling major upgrades or making minor touch-ups, Purchase Plus can help.

This product is available for existing homes and new builds so long as you are purchasing a maximum of 4 units and will make one unit your principal residence.

To be eligible, your home improvements must be permanent in nature and increase the value of your home. Examples of improvements that fully qualify often include:

  • Garage structures
  • Bathrooms
  • Kitchens
  • Plumbing and wiring
  • Roofing
  • Flooring
  • Basement development

Getting the down payment down

How much you can borrow for home improvements depends on your down payment.

Most lenders will approve up to $40,000 or 20% of the purchase price (whichever is greater) for improvements on home purchases with less than 20% down.

Keep in mind that while a purchase of up to $500,000 can be made with as little as 5% down, an additional 10% down will be required on any loan amount (including added renovation costs) above and beyond this threshold.

If you have 20% down, most lenders will approve up to $60,000 for home improvements.

The only caveat is that the property value (including added renovation costs) must be below $1,000,000 no matter what your down payment.

How it works

Step 1. Your offer will be made subject to financing. As you mortgage advisor, I will manage your paperwork and mortgage application.

Step 2. Prior to waiving financing conditions, you will supply a firm price quote from a licensed contractor that clearly outlines the improvements you will make.

Step 3. Your lender will consider the proposed improvements and confirm the as-improved value of the home.

Step 4. Upon possession, you will complete your renovations—as quoted to your lender—and provide a copy of all receipts.

Step 5. An appraiser will inspect your home to verify that the work quoted has been completed.

Step 6. Your lender will reimburse you for the work completed within 120 to 150 days of possession.

This mortgage product is perfect for you if you can:

  • Receive firm price quotes early in the home buying process
  • Cover improvement costs upfront, knowing you will be reimbursed upon completion
  • Have the work completed within 4 to 5 months of your possession date

Refinancing Plus Improvements

Do you want to finance upgrades on a home you already own? A Refinance Plus Improvements option lets you borrow up to 80% of the as-improved value of your home to cover renovation costs.

Customize your home your way

If you are interested in making home improvements, let’s talk about the financing options that are available through your mortgage.

With Purchase or Refinance Plus Improvements you can have your dream home and a balanced budget too.