CTV News - Mortgage Minute

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When shopping for your dream home, it can be difficult to find a property that fits all of your needs perfectly. You may find a place that’s in the perfect neighbourhood, close to work and schools, and it’s everything you were looking for, except for one thing. Perhaps you want to update the kitchen, or install hardwood floors. Obtaining a purchase plus improvements mortgage can be the best solution in this case.

So, how does it work? The purchase plus improvements mortgage allows a borrower to purchase a property and include home improvements in the cost. Any renovation that will increase the value of the home can be considered. Renovating the kitchen or bathroom, installing new windows, finishing the basement, or replacing carpeting with hardwood floors, are all examples of updates that will add value to your property.

It should be noted that not every update will add property value. Swimming pools, for example, are an upgrade that is widely expected to add value to a home. However, adding a pool or a hot tub can become more of a hindrance when it comes time to sell. Potential buyers may view this addition as an unnecessary expense, causing them to pass over an otherwise perfect home. Others may make their offer to purchase contingent on the pool being dismantled or filled in. Some other examples of upgrades that will not add property value are wall-to-wall carpeting, specialized media rooms, expensive appliances and improvements to aspects of the home that are expected to already be in working order (updated plumbing, furnaces or air conditioning units, for example).

How do I apply? The application process for a purchase plus improvements mortgage is not vastly different from applying for any other mortgage. The biggest difference in this case is showing the lender the improvements you are planning to perform and their cost. Your Mortgage Broker will require you to obtain up-front quotes for the renovations and submit them along with your mortgage application. The mortgage will then be approved for both the cost of the home and the renovations together.

What is the benefit to me? The main benefit of a purchase plus improvements mortgage is the ability to save money. Home renovations are so common, and funding them normally involves applying for a line of credit with a major bank, usually at an interest rate that is significantly higher than your mortgage. What the purchase plus improvements program allows you to do is bundle the renovation costs along with the mortgage amount you would already be paying, giving you one product, one low interest rate, and one monthly payment.

To find out more about the purchase plus improvements mortgage, talk to one of our professional Mortgage Brokers.