Home buyers looking at older homes know it is almost impossible to find a house that ticks all the boxes and is still affordable. Even when a home comes close to being perfect, quite often there is still a deal-breaker that leaves a buyer feeling like there is no way they could make the home work for them. Maybe the kitchen hasn’t been remodeled in thirty years or the master bathroom needs major upgrades, or perhaps, there are a few smaller, but still costly, projects that need to be done to turn a “no way” into an “absolutely”.
When a home doesn’t quite measure up, there is a special program available to buyers that can make all the difference. With a Purchase Plus Improvements loan, Calgary mortgage brokers can help turn dreams into reality.
What is a Purchase Plus Loan?
This program, also known as a CMHC Improvements Loan, allows home buyers to purchase a home and include the cost of necessary renovations. Not all upgrades are eligible for this type of loan. The improvements must be permanent fixtures that add value, so appliances are not included in the program. Nor can buyers repair items – for example, a non-functioning furnace – because they should all be in working condition at the time of sale. Items considered “general maintenance” are not accepted. Lenders are also usually unwilling to approve adding basement apartments.
The Purchase Plus loan is an excellent option for those with less money to put towards the down payment, like first-time buyers. Qualified applicants are able to borrow as much as 95 per cent of the costs of the planned upgrades.
How Does it Work?
Because the CMHC Improvements program adds renovation costs to a mortgage and has a specific timeline, the process is different than that of a typical home loan. Basically, it works like this:
- When buyers decide on a home that needs improvements, they need to make an offer that is conditional for longer than the usual period because there must be adequate time for a contractor to develop a quote for the desired renovations. (Tip: Quotes should err on the side of overestimating costs because funds that remain after the work is done can be put towards the loan’s principal. If work costs more than the original estimate, buyers are responsible for coming up with additional funds out of pocket.)
- The quote is then submitted to the lender and the CMHC. It must detail the scope and costs of the work. Once the amount has been approved, it is added to the mortgage.
- When escrow closes, the funds for improvements are advanced to a lawyer to hold until work has been completed. (Under some circumstances, funds can be advanced when needed during stages of construction.)
- The lender then has the home appraised to ensure the work outlined on the original quote has been completed
- The funds are released to the buyer.
How Can Calgary Mortgage Brokers Help?
First-time home buyers are always looking for creative ways to get the home of their dreams. It is a great time to buy a home in Calgary. A broker has access to loan products from a variety of lenders, so they can help you lock into the best possible rates. Mortgage brokers also offer personalized service and can help buyers avoid unpleasant surprises.
Under normal circumstances, buying a home can be a lengthy process, and Calgary mortgage brokers can provide information and tips to keep you on track. Use this mortgage calculator to get an idea how much you can afford. At Mortgages by Candice, we’ve developed answers to all the most common questions people have about mortgages.
With the more complicated procedures and timeline of the Purchase Plus Improvements loan, it just doesn’t make sense for buyers try to go it alone. A broker will guide you through the process from start to finish, so you can trust everything is done right—and on time.
If you are in the market to buy a home, why would you pay more for a home that someone else has made into their dream home when you can have it renovated specifically to meet your needs? Calgary mortgage brokers are available to help you negotiate a Purchase Plus Improvements loan, so you can build your renovation costs right into your mortgage. Contact Mortgages by Candice today to learn more.