Purchase Plus Improvements Program
You have been searching for a new home and have finally found one that you like. It’s right in your price range and all it needs is a few improvements. New floors, update the kitchen and bathroom, a coat of paint and it will be as good as new!
Your problem is, once you calculate what is required for the down payment, taxes and legal fees, you realize that you do not have the sufficient funds needed for the renovation. Lucky for you, there is a mortgage for that. It’s called a Purchase Plus Improvements Program, and we at The Mortgage Professionals can help you get approved for one.
The guidelines for the Purchase Plus Improvements Program state that the cost of the improvements must not exceed 10% of purchase price or $40,000. However, we have been able to get lender exception for higher amounts for qualified borrowers.
For example, let’s use a purchase price of $400,000 with a 5% down payment. In this case, the maximum improvement amount allowable would be $40,000 making the new value $440,000 once complete. Note that the required down payment amount would then be increased from $20,000 to $22,000 based upon the new purchase price of $440,000.
The first step in the approval process is to get quotes from a licensed contractor for the work that you want to be completed. The contractor quote is then submitted to the lender for review and approval. Once the conditional approval is issued by the lender including the improvements, the following documents will be required;
- MLS Listing & Purchase Contract.
- Appraisal to confirm the value and review the contractor quote for the work to be completed.
- Income confirmation.
- Down payment confirmation.
- Review of strata documents (if necessary).
Once all conditions are met with the lender. The lender then sends the mortgage instructions to your solicitor (Lawyer or Notary), who will then register you and the mortgage on title. On the completion date, your solicitor will then transfer the $400,000 as per the purchase contract, and the $40,000 of improvements money will stay in your solicitor’s trust account till the renovations are complete.
There is only one drawback to this mortgage program. The funds are not released to you until after the work has been completed and confirmed by a certified appraiser. This means that you are responsible for making the financial arrangements to get your project to the completion stage.
Once the lender receives the final appraisal report confirming that the work is complete, the lender then gives the approval to release the $40,000 held in trust by your solicitor. Please note, you are paying interest on the full $440,000 from day one, so it is in your best interest to get the work done as quickly as possible as you are paying for it.
If you would like to know more about the Purchase Plus Improvements Program or if you would like to apply for one, please contact The Mortgage Professionals to begin the process.