Purchase + Improvements
Purchase + Improvements
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Purchase +

Improvements

The Purchase + Improvement mortgage is a unique mortgage product allows qualified borrowers to make their new home just right for them, with tailored improvements, immediately after taking possession of the purchase property, including these costs within their mortgage.

Purchase +

How It Works

The first step is qualifying for a Mortgage. The purchase price of the home, combined with the total improvement cost, cannot exceed your maximum pre-approved mortgage amount. The combined amount is the “new purchase price.”

Improvements must add value to the home to qualify under the program and vary from lender to lender. The Improvement Cost cannot exceed 20% of the New Purchase Price or exceed $40,000. Some exceptions may be given depending on the scope of the work.

Note: The minimum required down payment is 5% and applies to the “new purchase price.”

With Purchase Plus
Purchase Agreement Price $298,000
Total Cost of Improvements
Provided by Quotes/Estimates for the work
$40,000
New Purchase Price $338,000
Monthly P&I Mortgage Payment* $1,319.30
Interest Paid for Improvements* $7,407.65

*25-Year Amortization at 1.40% Interest Rate.

Without Purchase Plus
Purchase Agreement Price $298,000
Monthly P&I Mortgage Payment $1,319.30
Line of Credit for Improvements $40,000
Monthly Line of Credit Payment` $500.00 (min.)
Total Monthly Payment $1,819.30
Interest Paid for Improvements` $34,212.98

`Minimum Payments at 9.00% Interest Rate.

The table above shows the benefits of building those improvements directly into the mortgage. Not only does it lower your total monthly expenses by $500.00, but there are massive interest savings. In this scenario, there is a difference of $26,805.33 in interest.

Step-by-Step

Purchase Agreement
The first step will be getting an accepted purchase agreement. Keep in mind that the purchase price plus the cost of improvements cannot exceed the total approved mortgage amount.

Quotes
Once an accepted purchase agreement is accepted, you will collect estimates/quotes for all improvements. Each quote must be on the contractor/company letterhead with their contact information, details on the scope of the work and the total cost. Getting multiple quotes and using the higher value is recommended because any remaining funds can be used for other improvements or rolled onto the mortgage balance. You will be responsible for any costs that exceed the total improvement budget. The new purchase price is calculated using the purchase price from the purchase agreement plus the total of the quote(s). the down payment is based on this new purchase price.

Pro Tip: Make sure the total includes the appropriate taxes.
Make sure each quote includes materials and everything needed to complete the work.
Keep copies of all quotes for your records.


Occupancy
Upon closing, the lawyer will hold the improvement budget in trust until all work is completed, ensuring the funds are used to improve the home's value. Some lenders require the completion within 120 days, while others do not. It is important to stick within a timeline because if we do not proceed with the improvements, we will roll those funds onto the mortgage balance as a pre-payment to save interest.


Improve
You may begin the improvements as soon as you take occupancy. You are responsible for paying the contractor/company and will be reimbursed upon completion. You must get a paid invoice(s) with the exact details in the original quote. If a different contractor completed the work, get a paid invoice and ensure the work details are listed.


Reimburse
Once all work is completed, we verify using either the paid invoices or an inspection. This depends on the improvement amount and the lender. After this step, we request the funds to be released, where the lawyer will issue you a cheque.


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