Why The Purchase Plus Improvements Program Is A Great Deal.

The Purchase Plus Improvements Program allows purchasers to borrower additional mortgage-money above and beyond their approved mortgage amount with the minimum down payment required to complete renovations within 120 days from the closing date of their purchase.

The Purchase Plus Improvements Program is instrumental in home ownership because of how difficult it is for most people to qualify for a moderately priced house in popular urban areas today. In all other circumstances, borrowers must wait until their home appreciates enough to be able to refinance for renovations.

Depending on appreciation rates and whether or not borrowers requalify, they may not get an opportunity to make aesthetic changes using mortgage financing. All refinancing is only possible if the mortgage amount requested does not exceed 80 percent of the loan to value and if borrowers can meet lending guidelines once again.

Therefore, the program is beneficial for several reasons, including:

1. Having access to enough mortgage funds to complete up to $60,000 worth of renovations while still being able only to put a minimum of 5% down towards the purchase price.  
2. The program may help increase property value through aesthetic changes in as little as four months. 
3. Unlike conventional purchases where borrowers cannot take out additional equity, the Purchase Plus Program gives borrowers access to more funds above and beyond their down payment since the lender assumes, in theory, the property will be worth more post-renovation.

How it works using a real example: 
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• Jody purchases a home for $500,000, with 5% down. 
• Her down payment, therefore, is $25,000.
• Jody would like a new kitchen and to complete a restoration of the downstairs bathroom. Therefore, the property she is purchasing will likely require approximately $30,000 in renovations. The amount required is based on a written estimate prepared by a contractor, which Jody provides to the lender. Provided Jody qualifies, the lender approves her renovation amount under the Purchase Plus Improvements Program, and the loan becomes $505,000 plus a high ratio mortgage insurance premium (because she has less than 20% down) of $20,200, which equals $525,200. 
• Jody must be able to complete $30,000 worth of renovations with her own resources first. 
• The lender will advance Jody's real estate lawyer the total mortgage funds, which include the $30,000 for renovations; however, her lawyer must retain the $30,000 separately in his or her trust account until the upgrades get completed, which must be within 120 days. 
• Once the renovations get completed, an appraisal is done on behalf of the lender. The inspection verifies the new value and confirms all the upgrades listed in the estimates delivered to the lender are complete. The lender then authorizes the borrower's real estate lawyer to release the funds to the borrower.  

Why Don't More Purchasers Use This Program?

There is only one main deterring factor that explains why more purchasers don't use this program more often and that is they must front the money for renovations first. 

The funds for renovations must be one of the standard traditional down payment sources, which include personal savings, RRSPs, a non-repayable gift from an immediate family member, sweat equity, existing home equity or proceeds from a sale. 

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The good news is that the Purchase Plus Improvement Program can be used under the following products: 

• Business For Self (Alt-A) Program
• Borrowed Down Payment Program
• Family Plan Program
• Homebuyer 95 Program
• Investment Property Program
• New to Canada Program
• Second Mortgage Program
• Vacation/Secondary Home Program

Eligible Properties include: 

• Maximum 4 units where 1 unit must be owner-occupied.
• New construction covered by a lender approved New Home Warranty Program*
• Existing resale properties.
• Readily marketable residential properties located in markets with demonstrated ongoing resale demand.
• Estimated remaining economic life of the property should be a minimum of 25 years.
• In addition, for 3 and 4 units, the property must meet the following criteria:
  • Municipal zoning
  • Fully self-contained units

The Purchase Plus Improvements Program is available through the broker channel and the lenders we work with also use more forms of income to qualify than banks accept which include the Child Tax Credit and disability income.

If you'd like to learn more about the Purchase Plus Improvements Program, please feel free to contact me at (647) 773-4849 or by mail at sarah.colucci@mortgageedge.ca.


Sarah A. Colucci, Sr. Mortgage Agent Lic. M140000929
Mortgage Edge Broker 10680 


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