How the Purchase Plus Improvements Mortgage Works

Buying a home is one of the biggest financial moves you'll make, and sometimes the right property needs a little work to make it truly fit your needs.

A Purchase Plus Improvements mortgage can be a smart way to handle it. It lets you finance renovations as part of your mortgage, so you can customize the home, build equity right away, and avoid draining your savings or relying on high-interest credit.

It also broadens your home search, giving you more options knowing you can upgrade or renovate after you move in while keeping everything within your budget.

How It Works

Once you have an accepted offer on a home, you’ll need to get quotes for the renovations you want to do.

As long as the upgrades are qualifying improvements, the lender can add the renovation costs to your mortgage based on the property's as-complete value.

Instead of trying to save up or borrow extra money later, you can finance the improvements upfront at a much lower interest rate than a credit card or unsecured line of credit.

Example

Let’s say you find a house with the perfect layout in a great area, but the basement isn’t finished. Or maybe you want to fence in the yard or update the kitchen and bathrooms.

Here’s how it could look:

Purchase price: $400,000
Renovation quotes: $40,000 (to finish the basement)
As-complete value: $440,000

Your down payment would be based on the as-complete value, not just the original purchase price.

For example:

5% down on $400,000 = $20,000
5% down on $440,000 = $22,000

You’re still buying the home for $400,000, but the lender bases your mortgage on the completed value once the renovations are done.

It’s a simple way to finance improvements upfront without stretching your budget later.

[If you want to run numbers on a home you're looking at, click here to start a quick pre-approval.]

Adding a Secondary Suite or Inlaw Suite

One lender also allows you to use the Purchase Plus Improvements program to add a secondary suite or inlaw suite, and you can even use the projected rental income to help qualify.

This can be a big advantage if you're planning to rent out part of the home to help offset the mortgage.

If you're thinking about adding a legal rental suite as part of your renovations, [reach out here] and I can walk you through how it works.

Final Thoughts

If you find a home that’s almost perfect but needs a few updates, a Purchase Plus Improvements mortgage can help you turn it into the home you really want without draining your savings or racking up high-interest debt.

It can also help you build equity faster by improving the value of the home right from the start.

Frequently Asked Questions (FAQ)

Can I renovate a kitchen or finish a basement using Purchase Plus Improvements?
Yes. Renovations that add value and livability, like kitchen upgrades or basement finishing, are usually eligible.

Can I add a rental suite with a Purchase Plus Improvements mortgage?
Yes, with some lenders. You can add a secondary suite and use the projected rental income to help qualify.

Do I have to pay for renovations upfront?
Maybe. Renovations are completed after closing, and the lender releases the improvement funds once the work is done. Some contractors may accept payment after the work has been complete.