What is Purchase Plus Improvements?
This mortgage product allows the purchaser of a property to add renovations cost onto the mortgage. The renovations must improve the value of the property. I have done allot of these mortgages and once the renovations stay within the guidelines for home improvements such as new flooring, roof, windows, kitchen or bathroom there is no problem with approval. A $10,000.00 Persian carpet is not going to fly.
A quote or cost estimation of the renovations has to be submitted at the same time as the mortgage approval for the purchase. On closing the mortgage funds plus renovations funds are sent to lawyer. The lawyer is instructed to hold back the renovations funds until work is completed. An inspector from the lender will come out to the property to make sure the work is complete. Typically the client has 60 days to complete the work after closing of the mortgage. I have seen renovations take longer and not be a problem however it is prudent for the client to get the work done in adequate time. Once the inspector signs off on the work the funds are released to the client to cover the cost of the renovations and added to the mortgage by the lender. Please note the client must have access to funds to compete the renovations first or have a contractor who will do it.
Main points to remember are
- Maximum loan amount $40,000.00.
- Available on owner occupied and investment properties.
- Available on high ratios and conventional mortgages.
- Client receives the same interest rate as with a regular mortgage and if insured the premium is the same. No extra costs.
- A detailed quote/cost sheet for renovations must be submitted with the mortgage approval application. The quote/cost letter submitted must be from a contractor or home hardware store with all taxes etc included. An option is to go to home depot or Rona for an estimation. You can do the renovations yourself but the quote letter has to be done professionally.
This is a great product to have in your back pocket. It can make a sale happen on a property that may not otherwise work.
Give me a call or send me an email if you have any questions. All product features are listed on my website at www.bestratesmortgages.ca