Purchase Plus Improvements Mortgage
This mortgage product allows the purchaser of a primary or investment property to add some immediate renovation costs onto the new mortgage. The renovations must improve the value of the property such as new flooring, roof, windows, kitchen, or bathrooms.
Part of this process includes obtaining a quote/estimation of the cost of the renovation. This can be obtained from a professional contractor or home department store such as Home Depot. This quote/estimation must be submitted with your application to the lender at the same time as the mortgage approval
Upon closing, the mortgage and renovation funds are sent to your lawyer. The lawyer is instructed to hold back the renovation funds until the work is completed. An inspector from the lender will come out to the property to make sure the work is completed. Typically, the client has 90 days to complete the work after the closing of the mortgage. If the renovations take longer that is not a problem however the work must be completed 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 borrower must have access to funds to complete the renovations first or have a contractor who will do the work upfront and then get paid once the lawyer releases the funds. Most contractors will work this way especially when you can show them the funds are ben held with the lawyer.
Critical points to note:
- Improvement loan is kept to within $40,000.00 for insured mortgages and $60,000.00 for non-insured mortgages (20% down or more).
- Available on owner-occupied and investment properties
- Available on high ratios and conventional mortgages
- The 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.