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16 Apr

Purchase Plus Improvements


Posted by: Sarah Makhomet

Searching to find the right home is quite challenging.  There are a lot of things to consider – is it a good neighbourhood, are there good schools close by, shopping, close to work, or parks.  Once you’ve found the right neighbourhood, finding a great home can be more of a challenge, as often the homes in great shape have multiple interested parties (which can drive up the price). 

Many people will not look at homes that require work, as coming up with the down payment is hard enough – they don’t have the additional funds for any renovations the house may require. 

What if there was a way to buy this home & build the majority of you home improvement costs into your mortgage?

Something which is not talked about very often is a purchase plus improvements loan.  This type of loan is available through many mortgage lenders, as it’s a program supported by CMHC and other mortgage insurers.  This will allow the home buyer to purchase a house in need of some upgrades, and following completion of certain stages of the renovations, the majority of the costs will reimbursed by the mortgage lender, and build into the mortgage.  This program can be used for any renovations which increase the value of the house – which generally includes kitchen & bathrooms. 

Many banks do not promote this program, as they would rather offer you a high interest credit card or line of credit to use for these renovations.  This is a deterrent for many home buyers, as $10,000 on a credit card could run about $250 to $300 in additional payments (on top the mortgage payment).  To include this same $10,000 into the mortgage at current rates would cost less than $50 per month.

The same program could also be issued on a refinance.  This can be very helpful as current regulations cap refinances to 80% of the home value.  If you’re looking to refinance to complete renovations, yet this will run over 80%, this may be another way to access a little more money (as they may look at 80% of post renovation value).

It is important if you’re looking at purchasing a home, completing some renovations and using this program to discuss this with your mortgage broker at the time of application.

To discuss this or any other type of mortgage needs, please contact Sarah Makhomet or Jonathan Tillger at Dominion Lending Centres Mortgage Village – 416.901.7410.