Are you daydreaming about your dream home?
Purchase-Plus Improvements products turn your dream home into a reality.
Many homebuyers looking at older properties find themselves in a common predicament: they’ve found a property that suits them, but it needs some costly and immediate upgrades.
Instead of racking up credit cards or selling investments, buyers are able to add the costs of those immediate renovations into their mortgage.
How does that work? This is known as a “purchase plus improvements” mortgage. This type of mortgage covers the sale price of the home, plus any renovations that would increase the value of the property, with as little as 5% down.
If you’re buying a home but want to finish a basement, redo a kitchen/bathroom, get a new roof, new windows etc., it can make a lot of sense to add those costs to your mortgage instead of carrying the cost on credit cards and lines of credit.
Thinking it sounds complicated? don’t worry!
The process is quite simple.
01
Once you have found a home, you need to get detailed written quotes from licensed contractors on the renovations you plan, outlining the scope and all costs. These are then provided to your mortgage broker, so an appraisal can be ordered.
02
Your lender will add the estimated costs of the renovation into your mortgage. For example, with a 5% down payment, your mortgage broker would apply for 95% of the “as improved” market value, which will be higher than the actual purchase price. The committed amount of the mortgage will be advanced to your lawyer or notary, who will be instructed to hold back the renovation funds until the work has been completed and inspected.
03
Once an inspection from an appraiser confirms all work is complete, the balance of the mortgage funds will be released to you to pay for the renovations. There are a few options for carrying your expenditures until the funds can be released. Some major home improvement retailers offer “no payment” options for up to six months. Larger contractors may also be willing to finance the project short-term if they see the documentation for purchase plus improvements financing.
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5 Things You Didn’t Know About a Purchase Plus Improvements Mortgage
