When selling a home, you want to boost the home’s value as much as possible to get the most out of the sale. When shopping for a home, however, many homeowners settle on a property that needs a little TLC as long as they can shave some of the original prices off or get it for a deal. Some properties may just need a fresh coat of paint, while you may want to completely transform others. But wait, you’re already committing to the costs and rates of a mortgage, where is the financing for renovations going to come from? Can you get a home loan that includes renovation costs as well? Believe it or not, it’s entirely possible with a purchase plus improvement mortgage. Let’s take a look at arguably one of the best ways to finance home renovations in Canada.
What Are Purchase Plus Improvements Mortgages?
A purchase plus improvements mortgage is pretty straightforward — it’s a type of loan program where you can proceed with your approved mortgage and add renovation costs to the mortgage. The costs will be combined, and you will make one payment as per usual with a mortgage. The percent of costs for renovation is fixed and varies from lender to lender, so consult with your bank or mortgage broker to determine all of their conditions. They are typically around the 10% mark of your house’s after complete value.
How Does A Purchase Plus Improvements Mortgage Work?
Similar to other processes related to mortgages and loans, you need to qualify for a purchase plus improvements mortgage. I’ll get into the specific requirements in a moment. With this type of mortgage funds are held by your lawyer until the renovations are completed. Confirmation of the upgrades are completed and the additional funds for the renovations are dispersed by your lawyer. Keep in mind that purchase plus improvements mortgages in Canada are granted to the following types of properties: new constructions, existing constructions, and up to 4-unit multi-residential properties.
Purchase Plus Improvements Mortgage Requirements
Now that we know everything that this renovation loan opportunity has to offer, let’s take a closer look precisely at all of the purchase plus improvements mortgage requirements.
- You will need to decide that the property requires renovations before the purchase of the home. If you receive the payment for the house, it’s already too late to add on the costs of improvement.
- You need at least a 5% downpayment on the property.
- It’s necessary for a contractor to assess the renovations you have in mind and give a professional estimate of how much the renovations are valued.
- Upon approval, you will have a period of 90-120 days to carry out the renovations to ensure the additional financing serves the designated purpose.
- Additional terms and conditions may apply depending on the lender. Ensure you ask for full details related to your specific case.
Alternative renovation loans
Why consider a purchase plus improvement mortgage at all? You have alternatives down the line if renovations aren’t necessarily immediately, but they are often more difficult. There’s always the option of refinancing or applying to take out some of your home equity for renovations. The issues there are oftentimes you’ll be required to have a certain percentage of existing home equity to qualify (~20% for example). If you can already tell that the property you like will need a little TLC, then a purchase plus improvements mortgage is the best way to finance your home renovations without the added hassle down the line.
Why Choose Jodi Habel For Your Mortgage Plus Improvements
I’m Jodi Habel — a licensed mortgage broker in Ontario, Canada for the past 15 years. It’s my aim to bring you one step closer to securing financing for your desired property. I offer the entire spectrum of mortgage broker services from refinancing to residential and commercial property financing support. Get in touch with me today and let’s connect you with the property of your dreams.