Introducing The Purchase Plus Improvements Mortgage
Get the house you want with a mortgage you can afford!
With 80% loan-to-value being the maximum you are now able to refinance your property, property values staying more level, and 25 years being the maximum amortization period on high ratio deals, it's not as easy as it once was to simply refinance and pull some money out of a home when it's time for some upgrades.
In addition to the above, it seems that all of the new homes being built in the Fraser Valley lack a decent sized yard for the average family to live in and enjoy. Many of my clients are facing the dilemma of buying a new home with all the bells and whistles, but a lackluster yard or, purchase an older home with a yard that their kids and pets can enjoy, but face the reality of having to upgrade or renovate the home they purchase.
The Purchase Plus Improvements mortgage is a great option for many people in this situation. They get credit for the increase home value, right off the bat, they get their money at a great interest rate, and they get to complete the upgrades right away and live in the home they really want!
Here's how the program works:
- The amount allowed for improvements is typically 10% – 20% of the purchase price, or up to $50,000 maximum. The money is to be used for “improvements” or “upgrades”, not necessary repairs like leaks or structure issues. Also must be for something that adds value to the home, not a chattel like appliances.
- You need to obtain quotes for the cost of the improvements that the client wishes to complete. Add the amount of the quotes to the purchase price, and this becomes the new value. The down payment is now based on this new higher value.
- The mortgage is funded based on the contract price in order to purchase the home, and the improvements money is held at the solicitor’s office until the work is complete.
- The work can be done by the client or a company/contractor, but client labour is not something that can be reimbursed for. If a client does the work him or herself, only the cost of the materials is released. If a contractor or company does the work, the invoice is submitted and they are paid directly for the full amount.
- An inspection report from an appraiser is required when all is done so we can confirm that the quoted work was completed.
- If the final costs end up being less than expected, the left over money is applied back against the mortgage’s principle balance.
This program is available at best rates, both fixed and variable, and may help those clients make a easier decision on which home is best for them.