What is a Purchase Plus Improvements Mortgage?
Purchase Plus Improvements Mortgage helps qualified homebuyers carry home improvement costs into their mortgage with as little as 5% down. The Purchase Plus Improvements program is designed for borrowers who want to make improvements to their home immediately after taking possession of the purchased property. The Improvements Program allows homeowners to do so with one manageable mortgage payment.
The Purchase Plus Improvements and Refinance Plus Improvements programs are administered through the three main mortgage default insurers (purchase plus improvements CMHC, Sagen improvement program, Canada Guaranty Improvement program).
What does this mortgage allow?
- The cost of home renovations are added to the home purchase price. Mortgages are available up to 95% Loan-to-Value (LTV) or refinances up to 80% LTV. (NOTE: you can only refinance in Canada up to 80% LTV).
- Maximum of $40K for home improvements or up to 20% of the appraised property value.
- Allows renovations that will improve the value of the property. It will not allow items that can be removed from the home. For example: appliances, blinds (shutters are considered built in). Garages, roofing, fencing, upgraded kitchen, bathroom renovations, windows, paint, flooring, adding on to the home, and landscaping are just some of the more popular improvements people complete.
- The home improvements can be completed by a professional contractor or DIY. (NOTE: You can not charge for your own labour).
- Amortization up to 25 or 30 years. This depends on the lender and if the mortgage is high ratio or conventional.
- Maximum 120 days post funding to complete the improvements. (NOTE: Some exceptions apply, especially if COVID restrictions are delaying delivery of material).
- Same great Mortgage Rates apply.
How does the Purchase Plus Improvements Program work?
Step 1: Once you have an accepted Offer to Purchase work with your Regina Mortgage Broker to determine what renovations need to be completed, gather a rough idea of how much they will cost, and what CMHC, Sagen, Canada Guaranty will allow.
Step 2: Acquire improvement quotes from professional contractors on company letter head and supply to the lender and mortgage insurer. Make sure the contractor quotes cover all anticipated costs and contain a detailed list of materials and labour costs as you can not go back later and ask for more funds.
Step 3: Once improvement quotes have been summitted to the lender they will send an appraiser to do an “As-Is” & “As-Improved” appraisal.
Step 4: Your local Regina Mortgage Broker will get your new mortgage approved based on the homes ‘As-Improved’ value.
Step 5: Once the sale of your new home has concluded and you take possession of your new home, you can immediately start the renovations that were submitted to the lender. You have to stick to the lender approved renovations. Since the lender will not release the funds until after the renovations have been completed you can use personal cash, credit cards, or lines of credit to pay for the improvements upfront.
Step 6: Notify the Mortgage Professional once you are getting close to completing the improvements. Supply the Mortgage Broker with the paid invoices and the broker will submit to the lender for their review. This will trigger the lender and mortgage insurer to request a final inspection to verify the home improvements have been completed as directed.
Step 7: Once the lender receives the final inspection report they will direct the lawyer to release the funds. Usually, the lawyer will also be instructed to pay out any credit cards, lines of credit that have been used to pay for the home renovations. If any of the contractors are still expecting payment this will also be looked after.
Step 8: With the upgrades done, and all the mortgage details taken care of, you can fully enjoy your new home.
- You have access to the same great mortgage interest rates for which you qualify. There are no hidden costs or mortgage rate increases for this program (NOTE: some lenders will request the borrower to pay for the appraisals — ask your mortgage professional upfront).
- Have firm price quotes prior to finalizing your mortgage, this will speed up the process.
- You will not receive any funds for the renovations until after the work is completed and reviewed by the bank and/or financial institution.
Very solid program and your local Regina Mortgage Broker will walk you through each step along the way. So, thinking of purchasing a home remember that their are Purchase Plus Improvement Programs available to you.
Not buying a home at this time? But you still want to renovate? No worries, as the Refinance Plus Improvements program is there for you. Remember the lowest rates available for your next mortgage loan still apply and no hidden fees.
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