Purchase Plus improvements is a mortgage program that allows purchasers to opt for homes that may not be complete “move-in ready”, by providing a sort of “cash back” to finance the renovations. It’s important to note, that this does not mean that the home needs a serious facelift, or that something is wrong with the home. It could just be that you want your home to be suitable for you based on your personal needs and desires.
Purchase Plus Improvements is an insurable product, whereby default insurance is taken out against the loan. Here are a few other characteristics to take note of:
- Down payment of less than 20%
- Good credit
- Fully qualified income
- Debt service ratios within the typical banking guidelines (39/44 max GDS/TDS)
Since the program is ultimately offered by the insurers (i.e., CMHC, Sagen, or Canada Guaranty), this means that by extension, this product is in the “A” lending space. In other words, banks and alternative lenders who offer these programs, are looking for borrowers who have demonstrated a strong application when it comes to their Income and Credit. As we know, Banks and Insurance companies don’t like to take on more risk than they need to, and it’s for this reason, that you will not find this sort of mortgage solution on the “B side”.
Having said that, this is a great program for anyone looking to purchase a home with a vision. In recent years, most home buyers are looking to buy homes that don’t require any work. You simply, pack your boxes and move in. And although there’s an obvious reason for that, you must remember that the sellers of those homes “bake in” a premium for having it that way. For example, if a homeowner spent $20k in upgrades in the home, they would likely tack on an extra 40-50k for covering their costs but also for undertaking the project and seeking a higher profit from the sale. On the other hand, if you were to buy a home that had out-date finished, fixtures, etc., and decided to do this yourself, you could potentially nab your home for a discount.
This program allows homeowners, especially first-time buyers with limited down payments, to make their purchases and have access to funds to improve their homes. Although the risk is greater for these lenders by extending additional funds, they mitigate it with the fact that your home will likely appreciate its value once the upgrades are completed…
One of the best things about a purchase plus improvements program is that it essentially opens up the doors to a wider range of homes that you can potentially consider buying. You may also find less “competition” if you were to make an offer because like I said before, most people today just want to “move in already” …
If you would like to learn more about purchase plus improvements or discuss your scenario in relation to this topic, feel free to reach out to us today – at (905) 455-5005.