Purchase Plus Improvements

A purchase plus improvements mortgage allows you to add renovation funds to your mortgage when purchasing a home. These improvements can be anything that improves the value of your home from finishing a basement, to replacing the flooring, to new landscape, etc. One thing to note is funds cannot be used for furniture, appliances, etc, the funds must be used to improve the value of the home.

As for documentation, the lender will need quotes from a licensed contractor when submitting the mortgage application. Assuming the renovations qualify, the amount is added to the value of the home, and therefore you can increase the mortgage amount accordingly.

Example: If you purchase for $400k and use a 5% downpayment (the minimum), your downpayment is $20k and mortgage of $380k (before adding CMHC fees). However, if you plan to add $40k in flooring, landscaping, and finishing the basement, the lender can then see the value of the home as $440k (i.e. a $400k purchase and $40k of renovations). Therefore we can then increase the mortgage to 95% of the improved value of $440k. This means the 5% downpayment of $440k is now $22k, and mortgage is increased to $440k - $22k = $418,000. In this scenario, you now have a $418k mortgage on a home purchased for $400k, as you're adding approved renovations shortly after moving in.

The main caveats are the improvements must be completed within 6-9 months of the closing date, and BEFORE the lender releases the improvement funds to you. Since you don't have those funds for renovations until the renovations are complete, you may want to use a contractor just requiring a deposit until the work is done, therefore you need less money up-front. Or you can use savings/investments, and replenish once the lender releases those improvement funds.

Feel free to reach out with your thoughts/ideas, and we can help tailor some advice to your specific situation.