Finding your dream house is extremely difficult so, as a result, we often have to compromise on the new home we buy and then fix it up the way we want. Getting a mortgage under the Purchase Plus Improvements program is a great way to get the renovations done.
I'm sure you would agree that it is not a good plan to get in debt after buying a new or resale home. The purchase plus improvements program allows home owners to bury the cost of renovations into their mortgage after closing. By avoiding this extra debt it allows home owners to stay above water and not fall behind on their mortgage payments or other monthly obligations.
Before getting a mortgage under the purchase plus improvements program, please review the following tips as there are some important things to consider before applying for it:
Who can get a mortgage under the purchase plus improvements program?
This program is available to purchasers that are insterested in improving the property once they own the property but would like to add the cost of the renovations onto the mortgage. The program is offered by CMHC and Genworth and applies to purchases with 5% down.
Unfortunately, banks are not allowed to lend based on what your house WILL BE worth when you finish your renovations, only what it IS worth now. That’s why some banks have come up with the purchase plus improvements program. It may be possible to get the funds for your renovations but you need to understand how the program works and who offers it. It’s not available everywhere, but that’s where I come in, I will help determine which bank will be best suited for your individual needs. There are some restrictions to the program, but I will gladly sit down with you and take the time to explain what they are.
Who qualifies as a professional contractor?
A professional contractor is just that, someone that performs renovations for a living. You will need to get a proper written estimate of the work being completed (detailed). Please verify that the invoice includes a GST registration number as the lenders will likely want to see that.
How much can you get for improvements?
There is no set amount as to what you can get for improvements, all lenders are different. The best thing to do is call my office and discuss with me your plans and we can find the best lender for the job. There are some basic guidlines.
If you are looking at renovations worth less than 10% of the total value of your new home then it greatly simplifies things. As the value of the renovation increases, it becomes a little more involved in organizing the advances however it is still very do-able. Larger renovation projects (ie. over $40,000) can be done in stages. Basically, you can start the project and when you get done a certain amount they will advance a portion of the money, at the next stage they will advance more and so on. There can be up to 4 advances for the renovation project.
You get the work done and then you get reimbursed.
A deal breaker for many people looking for a mortgage under the purchase plus improvements program is the fact that the bank will not advance the funds until the work is complete. This means that you have to find a way to pay the contractor and then you will get your money reimbursed to you after completion. If you are lucky, you may be able to find a contractor that will agree to take payment upon completion. If so, it's likely they would want a letter showing that you have been approved for the extra funds and a contract with instructions to your solicitor to pay the contractor upon completion. As part of my service to my clients, I will provide such a letter free of charge.
Improvements will increase your down payment.
When purchasing a home in Canada, it is required to put at least 5% as a down payment. If you put 5% down and then apply for the purchase plus improvements program you have to take the value of your renovations into account when calculating your down payment.
Example:
Normal Purchase:
Purchase Price: $180,000
Down payment required (5%): $9,000
Mortgage Balance: $171,000
Purchase + Improvements:
Purchase Price: $180, 000
Improvements: $20,000
Total Improved Value: $200,000
Down payment required (5%): $10,000
Mortgage Balance: $190,000
Why should you use Jim Thornton for your next mortgage?
I've been in the mortgage business for over 10 years and have originated $100 Million in mortgages. I understand the banks and other mortgage lenders and I know their products. Let me handle your purchase plus improvements mortgage and you will not only get a great rate, but amazing service too!
Call today toll free 1-866-257-0158 and let Jim Thornton get you approved!