Buying a Fixer-Upper? Here’s How Purchase Plus Improvements Can Help
Buying a home that needs some work can be a smart way to get into the market, especially if you’re looking to customize a property or increase its value. But one of the biggest questions buyers have is: How do you pay for the renovations after you buy?
That’s where Purchase Plus Improvements comes in.
What is Purchase Plus Improvements?
With Purchase Plus Improvements, you can roll the cost of renovations into your mortgage—instead of dipping into savings or taking out a separate loan. It’s a great way to get the funds you need to update the home right at the time of purchase, and finance it all at your mortgage rate.
And while many lenders cap improvement costs at 10% of the purchase price, I also work with lenders who can go well over $100,000 in renovation costs—as long as the numbers make sense.
Example: How It Works in Real Life
Let’s say you find a $400,000 home that needs $40,000 worth of upgrades.
Option 1: Using Purchase Plus Improvements
- Purchase Price: $400,000
- Improvement Costs Added: $40,000
- Total Mortgage: $440,000
- Down Payment (5%): $22,000
- Monthly Mortgage Payment: $2,307.97
Option 2: Using a Line of Credit (LOC)
- Purchase Price: $400,000
- Down Payment (5%): $20,000
- Monthly Mortgage Payment: $2,098.16
- Renovation Costs on LOC: $40,000
- Interest-Only LOC Payment: $300+ per month, with no principal paydown
So while the LOC might seem flexible, you’re left with two payments—and the LOC payment doesn’t reduce your balance unless you’re paying more than the minimum. By using Purchase Plus Improvements, the renovation costs are built right into your mortgage payment, spread over the amortization period, with no juggling separate debts.
What Can You Use It For?
Typical renovations include:
- Kitchen or bathroom upgrades
- New flooring, windows, or roofing
- New deck, fence, etc.
If you’ve been eyeing a fixer-upper but aren’t sure how to handle the cost of improvements, this strategy could be the perfect fit.
Call or text (902) 402-9779, or visit www.gregmatthews.tmgbroker.com/apply.aspx to fill out a five-minute pre-approval form.