With 85% loan-to-value being the maximum you are now able to refinance your property, property values staying more level, and 30 years being the maximum amortization 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 lacklustre 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 increased 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 $40,000 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 get quotes for the cost of the improvements that the client wishes to complete. Add the amount of the quote/s to the purchase price, and this becomes the new purchase price. The down payment is now based on this new higher purchase price as well.
- The mortgage is funded in order to purchase the home, but the money to be used for improvements 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 labor 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, send us the invoice and we can pay them directly for the full amount.
- An inspection report from an appraiser is required when all is done so we can confirm that the said work was completed.
- If the final cost ended up being less than expected, the left over money is applied back against the mortgage.
This program is available at best rates, both fixed and variable, and may help those clients make an easier decision on which home is best for them.
Think this program might work for you or someone you know? Call me any time to discuss!