I’m Jason Scott, Edmonton Mortgage Broker, and today I’d like to talk about what a Purchase Plus Improvements mortgage is. Buying a new home can cost a lot of money. One way of cutting costs is to buy a home that is a “fixer-upper”. This can be beneficial for those who are DIY enthusiasts, or if you are looking to fix and flip the home. You are probably thinking, a fixer-upper home may cost less, but how much will it cost to make improvements? This is where a Purchase Plus Improvement mortgage comes in handy. Our Edmonton mortgage broker team is here to tell you what you need to know about this mortgage option.
What is a Purchase Plus Improvement mortgage?
If you want to get started on making home improvements right away, rather than having to wait for equity to build up, a Purchase Plus Improvement mortgage offers you a way to do this. With this mortgage product, you are able to borrow funding to cover a specified percentage of the overall cost of the renovations you wish to make. The price of the home and the amount that you are borrowing for improvements are rolled into one mortgage loan and offer a monthly repayment that is easier to manage. However, there are requirements that you will need to meet, such as being able to provide building and work quotes. With a Purchase Plus Improvement mortgage, you are able to:
- Borrow up to 95% of the home’s renovation costs, which can be added to the home’s overall purchase price
- The amortization schedule can be up to 25 years
There are certain property types that are eligible for a Purchase Plus Improvement mortgage loan:
- Already existing properties
- New construction build properties
How does a Purchase Plus Improvement mortgage work?
Your first step is determining whether you are eligible for the Purchase Plus Improvement scheme. You will then need to determine what renovations are needed and get an estimated cost. You can then contact our Edmonton mortgage broker team to go through the approval process. Once this has been started, you will be required to get actual quotes from contractors (not rough estimates) for having the work done. The work needs to be done by a licensed contractor and the quotes that you are given will need to have a specific breakdown of the type of work that is being done.
Once you have your quotes, you can give them to our Edmonton mortgage broker team so that we can revise the mortgage with the actual amounts added in. Once you have been approved and have taken possession of the property, you can start work on the renovations that were agreed upon.
Lenders don’t advance the funds when you take possession. You need to get the work completed and paid for using savings, a credit card or line of credit.
You’ll have a maximum of 120 days to get the work completed.
Once the home is 100% completed and paid invoices are provided an appraiser will inspect the property to confirm the work is finished. The inspection report usually costs about $150.
The renovation money will then be released.
Note: The Purchase Plus Improvements loan does not impact your mortgage rate.
- The Purchase Plus Improvements program is an option that offers flexibility in finding a home that you can afford and helps you customize or upgrade it.
- The Purchase Plus Improvement program is offered by the 3 major mortgage default insurers of Canada: Sagen, CMHC, and Canada Guaranty
- The improvements that you make must be of the permanent kind. For example, having flooring installed, painting the interior and/or exterior, adding cupboards, having a new furnace installed, and repairing or installing a roof. Non-permanent renovations such as appliances are not covered.
If buying a fixer-upper home is something you would like to do, give our expert Edmonton mortgage broker team a call today to see if you are eligible for the Purchase Plus Improvement program.
About Jason Scott, Edmonton Mortgage Broker
Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’ll be your trusted partner who will help you get the right mortgage for your family home or Investment property. I’m Jason Scott, and I’ll be your Mortgage Broker Edmonton.