Have you found a home in the perfect location but the finishings are less than ideal? Maybe the house needs new shingles or updated doors. Great news – we have a mortgage product for that! A Purchase Plus improvements mortgage allows you to add the costs of renovations to your mortgage.

Sounds perfect, doesn’t it? It is a very helpful product for homeowners but there are some important details to keep in mind:

• QUOTES. All quotes must be received up front. There are no exceptions to this. You will need to work with your Realtor to obtain quotes for the renovations to be completed as these quotes will need to be sent to the lender with your offer to purchase. In most cases, the lender will request an appraisal to determine the value with the renovations completed.
• DOWN PAYMENT. Your down payment will be based on the purchase price + the total cost of the improvements. Depending on the value of the improvements, this can add up to a significant sum and so you will need to have access to additional funds to cover the increase.
• MAXIMUM IMPROVEMENT VALUE. This is very lender specific and can also be dependent on the type of home you are planning to purchase as well as its location. Most lenders will cap the total value of the improvements to 20% of the purchase price and have a maximum improvement value of $40,000. There are lenders who will go beyond the $40,000 cap but, as mentioned above, it is dependent upon location and the type of property.
• WHAT CAN BE INCLUDED? Most renovations can be included such as flooring, shingles, cabinets, windows…the list goes on! You can also add a garage if the property does not currently have one. Appliances, furniture, landscaping, or other forms of moveable property cannot be included in the quotes.
• TIMELINE. 90-120 days is the typical time frame that lenders will allow for completion of the work. With the current delays in the supply chain, it is important to discuss this timeline with your contractor to ensure that the supplies will be ready and that the work will be completed on time. Some items, such as a fence, are seasonal and may be able to receive an exception to this. We have access to limited lenders with a 1 year time frame – these are beneficial when dealing with a large-scale renovation. Keeping track of timelines is very important – if the work is delayed past the maximum allotted time, the lender may decline the improvement value…leaving you on the hook for those costs.
• NO CHANGES. The value of the property was approved based on the quotes provided. You will be unable to change the work being done after you gain possession and also cannot complete just part of the quote. Work must always be completed as per the quote provided.
• VERIFYING COMPLETION. If the total of the renovations is less than $15,000, we can usually supply lenders with confirmation of paid invoices. Once reviewed, they will release the funds (see below). With larger renovations, lenders will require that an Appraiser inspect the property to verify that the work has been completed as per the quotes that were initially provided. It can take about a week to process the release of the funds and so it is important to make sure that all of this happens within the lenders’ allowed timeframe.
• PAYMENT. When the renovations are complete and verified, the lender will release the funds. Your lawyer will handle the disbursement of these funds to the contractor(s) used.

There are many variables to factor in when determining the options available to you for a Purchase Plus Improvement mortgage. I am happy to assist you throughout the process and help you make your house a home!