Making the Most of Purchase Plus Improvements: A Guide for Homeowners

Jun 7

If you're a homeowner looking to buy a home that needs a little TLC, the Purchase Plus Improvements program can be a game-changer. This program allows you to add renovation costs to your mortgage, making it easier to finance the upgrades your new home needs. Here's a comprehensive guide on how to navigate this program, with insights from Liane Moskal, a seasoned expert in helping new homeowners.

Add Renovations into Your Mortgage

With the Purchase Plus Improvements program, you can include renovation costs of up to $100,000 in your mortgage. This means you don't need to secure separate financing for your home improvements, simplifying the process and often leading to better loan terms.

Quotes Needed Before Approval

Before you can get approval for your mortgage, you need to provide quotes for the renovations you plan to undertake. This is a crucial step as lenders need to see a clear plan and cost estimate for the improvements you intend to make.

Different Lender Requirements

Lenders have varying requirements for the disbursement of funds:

Some require receipts upon completion of the work.
Others may need an appraisal to confirm the work has been done.
A few lenders want you to pay upfront and then reimburse you.
The lender releases the funds at the lawyer's office so clients can pay themselves or contractors directly.

Understanding your lender's specific requirements will help you plan your renovations and cash flow accordingly.

Impact on Down Payment

Including renovation costs in your mortgage will increase your down payment. For example, if you purchase a home for $500,000 with a $25,000 down payment, adding $100,000 in renovations will increase the total purchase price to $600,000. Consequently, your down payment will increase to $35,000.

Pre-Approval is Crucial

Before you start looking for a home, ensure you are pre-approved for a mortgage that includes the cost of renovations. This pre-approval confirms that you can afford the increased payments once the renovation costs are added to your mortgage.

Timeline for Completion

The timeline to complete the renovations typically ranges from 3-6 months, depending on the lender and the scope of work. It's important to have a realistic renovation plan and schedule to meet these deadlines.

Choosing Value-Boosting Upgrades

Select upgrades that will enhance your home's value. Prioritize improvements like new doors, windows, kitchen and bathroom remodels, flooring, painting, and wiring. These upgrades not only improve your living space but also increase your property's market value.

Appraisal Requirement

An appraisal is necessary to ensure the renovations add sufficient value to the home. The appraisal helps the lender assess the post-renovation value and confirms that the investment is worthwhile.

Program Flexibility

You can use the Purchase Plus Improvements program as long as the property is your primary home. However, there's a lender option for those with a 20% down payment that allows up to $40,000 in renovations.

The Purchase Plus Improvements program is a fantastic opportunity for new homeowners to buy and transform their dream home without the hassle of separate financing for renovations. By understanding the requirements and planning accordingly, you can make the most of this program and enjoy a beautifully renovated home that meets your needs and increases in value.

For personalized advice and guidance, reach out to experts like Liane Moskal who can help you navigate the process and make informed decisions. Happy renovating!