What is a Purchase Plus Improvements Mortgage?

If the media had been right, by now we would have seen asking prices of homes plummet and a number of Power of Sale properties on the market. That hasn’t been the case due to the fact that we in Canada have a serious housing supply shortage. It boils down to basic supply and demand and homes are certainly holding their value and still appreciating.

Every now and then, a diamond in the rough is listed at a lower than average price, and these properties usually require a fair amount of work and updating to bring them up to modern standards. Perhaps it’s previously been a rental or perhaps it’s an estate sale – there are many reasons why homes hit the market ‘as-is’.

If you’re handy, you can save a bundle by purchasing a home that needs some TLC. Did you know that it is possible to roll some of the renovation costs into your mortgage? This can be done via a “Purchase Plus Improvements” mortgage.

Let’s say you’re able to buy a fixer upper for $650,000 with 20% down and renovations will cost $50,000. The mortgage lender will actually provide your loan based on the ‘as-improved’ value of $700,000 which means instead of a mortgage for $520,000 it would be $560,000 and therefore, you won’t have to spot the entire reno out-of-pocket.

Once your home is fixed up, you’ll have improved its value by much more than $50,000 and even though we are still in a higher interest rate environment, the equity you’ll be able to accumulate quickly is priceless. I always say, “you date the rate and marry the home”.

To explore various scenarios and to get a fully underwritten pre-approval you can count on, contact me anytime. My services are free (for the majority of mortgages) and I’m local, experienced and always happy to help.