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Purchase Plus Improvement Mortgage


Purchase plus improvement mortgage, how to finance the renovation of your home at the time of purchase or refinance.



With so many mortgage products in the market, it is difficult to comprehend how the purchase plus improvement mortgage  or refinance plus improvement can benefit the average consumer. This specific mortgage product is to assist the consumer by have the renovation portion of the loan added to the mortgage at the time of purchase or refinance, prior to completion of the renovation.


Five- simple steps to guide through the process of getting a purchase/refinance improvement mortgage:

1)      Purchase with as much as much or as little as 5% down

2)      Finance the improvement portion to a maximum 10% value of the purchase price


-Purchase price $100,000
-Down payment 5% =$5,000
– Improvement portion 10% of the improved value= $10,000
-Mortgage amount $105,000 plus CMHC premium ( if less than 20% down payment)
-Funds advanced at the time of closing will be $95,000

3)      Refinance plus improvement cannot exceed 10% of the improved value


-Value of improved property $100,000
-New mortgage amount will be current mortgage plus 10% ($10,000)
-No CMHC authorization is required if mortgage is insured.

4)      Obtain a licensed contractor and get written quote for the improvement costs to be forwarded to the lender for approval

5)      Call for progressive draws and pay contractor (appraisal will be required to show the increase in value if the improvements)


There are many restrictions for this type of mortgage, a lawyer must be retained for the draws, there will be an appraisal require, not all improvements increase the property value.

The maximum cost allocated for the improvements will be the lesser of 10% or $40,000. The lawyer will be required to hold funds based on individual provincial builders lien act (10% to 40%).

To add to the cost will be the expense of making full monthly payments (PI) on the entire mortgage amount after the first draw (advance of funds). Purchase plus improvement / refinance plus improvement is available for single-family homes and condominiums. All improvements must be completed within 120 days (4 months).

When the decision has been made to go with a purchase plus improvement mortgage it is best to consult a professional that has many years of experience and expertise.

Mortgage brokers at Ratehouse.ca have the knowledge and expertise to assist you with your unique financing needs.





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