Using Purchase Plus Improvements To Get The Home You Want
Are you considering buying a property that needs renovations but are unsure about it due to the added expenses? If you’ve done your research and feel like you can fix the place up to suit your needs, then there is no reason to not purchase a home that will require some added work. As for the renovation costs, you can cover them with a Purchase Plus Improvements Mortgage, which will be added to your primary mortgage.
What is a Purchase Plus Improvements Mortgage?
A Purchase Plus Improvements mortgage is a debt instrument that helps you cover renovation and repair expenses beyond the scope of your purchase mortgage. This product is a suitable financial solution if you’ve found the perfect home but would like to change certain items like flooring, cabinets, windows, bathrooms, roofing, etc.
This lending program allows buyers with an insured mortgage to typically add 10% of the purchase price or $40,000, whichever is lower, to their mortgage to cover renovation costs. But, when using it conventionally (that is, with a 20% down payment or more), the program typically allows for 20% of the property value or $60,000, whichever is lower.
The biggest advantage of this financial product is that it provides you with renovation funds without tying up your money. Similarly, it adds money for renovations at the low rates of a mortgage instead of unsecured funds, which are typically available at higher rates.
How to secure Purchase Plus Improvements?
To obtain a Purchase Plus Improvements mortgage, you must get quotes to support the work that needs to be completed when working on your mortgage approval. Once the mortgage is funded, and the improvements are completed, you must provide paid invoices along with an inspection report to confirm the work is completed. Once the lender has confirmation that the renovation work is, they will release the renovation funds back to you.
In case you’re wondering where you need to go to apply for a Purchase Plus Improvements mortgage, you can simply approach your primary lender or mortgage broker. They will add this financial product to your mortgage when seeking approval for a mortgage to purchase a property.
What are the alternatives to Purchase Plus Improvements?
Other options to the Purchase Plus Improvements include:
a. Using personal savings after funding
b. Borrowing from unsecured funds at typically higher rates
c. Refinancing the home at a later date
While these options are great, they also have drawbacks. When you use your personal savings for your home renovation, especially when purchasing a house, you’re forced to reduce your down payment. This could result in the loss of several benefits. If you chose to use unsecured funds to pay for your renovation project, you’d have to bear higher interest rates. In the case of refinancing, you’ll need to go through additional paperwork and procedures. You’ll also need to have an existing mortgage, which you’ll need to replace with a new one to cover your expenses. Breaking an existing mortgage comes with a penalty, so you need to be prepared to cover this expense.
If you happen to be a first-time homebuyer, Purchase Plus Improvements might be an ideal fit for you. All you need to do is get in touch with a lender or mortgage broker who can provide you with more information on this product.
If you live in Edmonton, Spruce Grove, Stony Plain, St. Albert, Devon or surrounding areas and are looking for a qualified mortgage broker, reach out to Jordan St. Pierre at The Mortgage Centre. I am a licensed mortgage specialist and I tailor financial solutions to suit your specific needs, goals, and future plans. I ensure that every interaction we have is a positive experience that progresses towards your goals of purchasing, renewing, or refinancing. I take an unbiased and honest approach to mortgages and leave nothing to chance.