A Mortgage that Helps with Renovations?

The house that you like is nearly perfect, except that perhaps it needs a little TLC; new bathroom, kitchen or basement finished.

But you only have 5% down payment and not the extra to do the renovations.

What can you do and what are your options?

Did you know that the Purchase Plus Improvement Plan lets you add the cost of upgrades to your mortgage before you move in?

It allows individuals to purchase the property and include improvements such as bathroom, roof, kitchen, hardwood floors, windows, etc, generally anything that will improve the value of the home is acceptable!

The way it works is first you must obtain written quotes from licensed contractors for the repairs and or the improvements to be done to the home before the mortgage financing and when the application for mortgage is made. The application would be  submitted to both the mortgage lender and CMHC for approval and the request is made for 95% of the purchase price PLUS 95% of the cost to complete the improvements.

Here is an example:

Purchase price: $250,000 X 95% = $237,500
The quote for the renovations: $ 15,000 X 95% = $ 14,250
Total Mortgage: $265,000 X 95% = $251,750

An important thing to note is there is no advancement until the work is completed, the funds are held back by the lawyer. The Lenders typically require work to be completed within 120 days of closing, and an appraiser is sent out to confirm the completion and usually there is a cost associated with the appraisal.

Other things to note is appliances, furnace are usually not considered as home improvements.

Nilay Ertemur


Author: Nilay Ertemur

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