You’re looking to buy but everything you’ve seen is either out of your budget, or in shambles. Then, after months of searching for your dream home your stubborn edge starts to dwindle and you’re thinking that settling for less than perfect is your only option.
But wait, there’s hope for you!
With the Purchase Plus Improvements program you can buy the fixer-upper without worrying about how many years you’re going to have to live in an eyesore or deal with a cracked bathroom floor. Allowing qualified home buyers to renovate their new property immediately after taking possession with as little as a 5 percent down payment, this program allows you to purchase a home and include the cost of renovations in your purchase. Finding your dream home just got a whole lot easier!
Also known as the improvement, renovation or high-ratio mortgage, this option covers the sale price of the home, as well as any renovations that would increase the value of the property.
While home buyers can take advantage of the low interest rates associated with a mortgage and pay one monthly payment, there are a few steps they must first take to be approved for the program.
1. Make the purchase offer conditional on getting approval for the renovation mortgage program.
2. Get quotes from a contractor to determine the cost of the renovations. The Canadian Mortgage and Housing Corporation (CMHC) will approve a loan of up to 95 per cent of the ‘as improved’ value of the home, provided the money you’re putting into the home does improve the value.
*Note: Renovations cannot be strictly cosmetic, but must be part of a broader project like changing a bathroom, kitchen or flooring.
3. The bank will send an inspector to confirm that based on the list of requested improvements, they’ve been done sufficiently. The inspector will then send the report to the bank indicating that everything’s complete and they’ll release the funds to the client. Quotes are often required in order for the lender to release funds, though some lenders will make exceptions for small improvements.
Depending on the home-buyers’ current situation, the program can offer more benefits than a traditional line of credit.
“Most banks will give you a line of credit of up to 80% of the market value of the property, whereas the PPP/CMHC-insured mortgage can go up to 95% of the improved value of the property, so it provides a way for home-owners that only have 5% of the down payment to be able to buy the home they want and improve it as well,” says Tina Tehranchian CFP Financial Advisor at Assante Capital Management Ltd.
To learn more about the Purchase Plus Improvement program, contact us today!