Home Purchase Plus Improvement Mortgage?

Home Purchase Plus Improvement Mortgage

The Home Purchase Plus Improvement Mortgage is a program you can benefit from and increase your chances of finding a home. Especially now, in a competitive market where bidding wars take most of your energy, you may not find the money to buy a “fixer-upper.” This program allows you to purchase a home that would have overlooked because it was in need of a little TLC. This program helps buyers pay for their renovations with only one manageable mortgage. The Purchase plus Improvement Mortgage can fulfill your wishes and make your dream house come to life.

It is important to enlist trusted mortgage brokers or other lenders, so you can get the best mortgage loans in Kelowna. Choosing the right team will allow you to benefits from the best rate solutions and  high-quality service. 

But What is a Purchase Plus Improvement Mortgage?

Also known as the CMHC Improvement Program, it gives qualified buyers the possibility to borrow up to 10% of the as-improved value of a house/home. This sum is intended for renovation only and is included in the original mortgage loan amount. This is a flexible financing option, and it is offered by the Canada Mortgage and Housing Corporation, also known as CMHC.

As an example to understand how it all works, let's presume that the purchase cost of a home is $500.000. If the renovation you want to finish would result in the expense of the house going up by $50.000, for a value of $550.000, you could borrow 10% of that, which is $55.000, for renovation. This choice is perfect for those who are first-time homebuyers. They have smaller down payments and are not able to afford both downpayment and the expense for any renovations they want to do as soon as they are in possession of the new property.

But How Does it Work?

Those who borrow money need to provide a quote from the contractor. This needs to happen before closing on the property when the approval is both submitted for the mortgage lender and the CMHC. To do this, you have to add a condition to your Agreement to Purchase that stipulates that you want a contractor to verify and inspect the home before closing. Then, the contractor will provide a quote that breaks down the scope of costs and work associated with it. Once both the lender and CMHC approve the improvement amount, then the sum is added to the mortgage loan.

The improvement amount is given to your lawyer on closing day, and he will hold onto the money until the renovations are complete. This means that you will receive the money when the work is done. That is why we recommend having access to an unsecured line of credit. This way, the initial deposit/costs can be paid, and work can begin. The moment the renovation is complete, the lender sends an appraiser to your home. This will affirm that the scope of the task outlined in your quote is done. After confirmation, the lender will authorize the release of the improvement amount to you.

Any catch?

With the Kelowna Home Purchase plus Improvement Mortgage, borrowers can not include the cost of appliances in the quote. Appliances are not part of the structure itself and can be moved and even sold if you ever decide to. In addition, CMHC and lenders will not approve renovations that will add another unit to the property or fix something such as a furnace (that should be in a proper, working condition when you buy the home).

Many first time buyers try to find new and creative ways to get into this expanding expensive market. We managed to help countless clients build and renovate their homes, instead of using the program of purchasing a home that has already been renovated. My clients have had positive and professional experience with Start to Finish Construction, a West Kelowna contractor, using this type of home renovation mortgage. 

For more information about this type of loan or any other contact Danielle Grundy. Feel free to ask as many questions as you need.

Danielle Grundy

Danielle Grundy

CENTURY 21 Assurance Realty Ltd.
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