Are you looking to purchase a home that requires work to be done? Maybe you don’t have the time or inclination to do the renovation yourself or want it done fast so you can move in quickly!  Why not have the funds available so you can pay someone else to do the work?

Or maybe you are qualified to manage the renovations yourself but require the funding to do so?  Consider a Purchase Plus Improvement Mortgage.

A Purchase Plus Improvement Mortgage can be a great fit for a newly purchased home or an existing home.  This unique type of mortgage is designed for those who wish to purchase a home or already own a home that may require some immediate upgrades. If the property is not exactly what you want, then build it, renovate it, add it and upgrade it! Maybe you have a desire to add your own personal touch or increase your living space.

Improve or upgrade your home by:

• Adding a new or updated kitchen
• Developing the basement for more living space
• Updating or replacing the carpeting or maybe adding hardwood
• Adding a garage or work room
• A new bathroom with maybe a jetted tub – your personal sanctuary
• A new roof
• A more efficient central air or furnace system
• Adding new siding, eaves or fascia
• Replacing or updating doors and windows
• Adding a swimming pool or major landscaping

How does it work?

The application for mortgage financing is requested and is made for 95% of the purchase price plus 95% of the cost to complete the improvements. The lender will “hold-back” on closing the “improvement” portion of the mortgage until the work has been completed and inspected, normally within 30 to 60 days of closing. Once the work has been completed, the lender will advance the balance of the funds to either you or the contractor.

Let’s assume that you have a 5% down payment (20% equity for an existing home owner). Before the mortgage financing is arranged, written quotes are obtained from licensed contractors or suppliers for the repairs and/or the improvements to be done to the home.

What does this mean?

Let us give you an example with 5% down payment on a purchase:

Purchase price: $300,000 x 95% = $ 285,000

Cost of improvements: $ 30,000 x 95% = $ 28,500

Total mortgage 285,000.00 + 28,500.00 = $ 313,500

Therefore, an application is made for a mortgage in the amount of $313,500, which represents 95% of the purchase price plus 95% of the improvements.

On closing what happens is that the mortgage amount of $285,000 is advanced along  with adding your 5% from your down payment ($15,000) to complete the purchase of $300,000.00 and now you own the home.

After closing the contractor or yourself, complete the improvements as soon as possible and then the lender advances the hold-back of $28,500, and you pay the additional 5% of the cost of the improvements ($1,500) and the $30,000 owed to the contractor or you directly, can be paid as per the original quote for the work.

Everyone is a winner! You are happy because you have $30,000 of improvements done to the home with a cash outlay of only $1,500!  The lender is also happy because they now have a mortgage on an improved home.

If this is a mortgage that would suit your situation, please feel free to contact me.

905-807-MARG (6274) or marg.deboer@dominionlending.ca