Purchase Plus Improvement Mortgage: Finance Your Dream Home Renovations
Purchase Plus Improvement & First Time Home Buyer Mortgage Across Edmonton, Sherwood Park, Alberta, and Nationwide.
Upgrade Your Dream Home with Our Purchase Plus Improvement Mortgage Solution!
Getting pre-approved for a mortgage is a crucial step in the home-buying process. It provides you with a clear understanding of how much you can afford to spend on a home, helping you narrow down your search and avoid disappointment.
One of the key benefits of pre-approval is the rate hold. This means that if interest rates increase while you're house hunting, you're protected with the lower rate you were pre-approved at. On the other hand, if rates decrease, you'll automatically qualify for the new lower rates.
Pre-approval also gives you a competitive edge in the housing market, as sellers are more likely to consider offers from pre-approved buyers. Overall, it's a valuable tool that can save you time, money, and stress during your home-buying journey.
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Some Examples:
| Usual way of financing: | |
|---|---|
| Purchase Price: | $300,000.00 |
| Less 5% down payment: | $15,000.00 |
| Financing Required: | $285,000.00 |
| Plus 3.15% Insurance premium: | $3918.75 |
| Total Mortgage: | $293,977.50 |
| Mortgage payment @ 3.5% | $1,467.74/month |
| Purchase plus Improvements: | |
|---|---|
| Purchase Price: | $300,000.00 |
| Proposed Improvements: | $20,000.00 |
| As Improved Value of Home: | $320,000.00 |
| Less 5% of 'as if improved' value: | $16,000.00 |
| Financing required: | $304,000.00 |
| Plus 3.15% Insurance premium: | $9,576.00 |
| Total Mortgage: | $313,576.00 |
| Mortgage payment @ 3.5%: | $1,565.59/month |
Purchase Plus Improvement Mortgage (Renovation Mortgages)
If you have your eye on a fixer-upper or are thinking about building your dream home, financing your endeavors may be easier than you think.
"Renovation Mortgages" give homeowners the ability to renovate a newly purchased or refinanced home and roll the cost of the improvements into the balance of the mortgage. This allows the homebuyer to benefit from the low interest rate associated with their mortgage. It also provides the simplicity of one mortgage payment and requires less than 20% of the home's 'as if improved' value for a down payment.
To acquire this type of mortgage, a buyer must first make the offer conditional using a renovation mortgage program such as CMHC's 'Purchase Plus Improvement Mortgage' program. The next step is to acquire at least three quotes from contractors to determine the cost of the renovations. CMHC will approve a loan of up to 95% of the 'as if improved' value of the home or the value of the newly constructed home, provided the money you're putting into the home does, in fact, improve the value.
There are a few rules to remember. Newly constructed homes may receive up to four monetary advances before the home is completed. Refinanced or newly purchased homes will only get one advance for 95% of the original value. In this scenario, you must be prepared to finance the renovations and improvements up front, keep all your receipts, and await reimbursement after the renovations are complete. The lender will have to evaluate the “newly improved” value once all the work is done.
If you're thinking about renovating a new home but have put down more than 20% of the down payment, consider taking advantage of a Home Equity Line of Credit (HELOC). This is a low-interest line of credit that is secured against your home.
