Getting a mortgage can be a daunting task. There is so much to know and understand including some pretty confusing language. Borrowers are often confused by mortgage terminology, so in an effort to keep you educated we welcome you to the monthly edition of Mortgage LINGO defined.
Purchase Plus Improvements Mortgage
Have you fallen in love with a home but it needs a little TLC? Don’t shy away from that fixer-upper!
A Purchase Plus Improvements Mortgage allows you to make improvements immediately after taking possession of your new home. The costs of the renovations will be rolled into one easy-to-manage mortgage.
Here’s how it works:
Obtain a mortgage pre-approval from your mortgage broker to determine your maximum approval amount. The amount allowed for improvements is typically around 10% -20% of the purchase price or up to $40,000 maximum. The money is to be used for “improvements” or “upgrades” which will add value to your home. You will need to obtain quotes for the cost of the improvements that you wish to complete. To determine the “value” of the home that the lender will consider, add the amount of the quote(s) to the purchase price. The down payment is now based on this new higher value. The mortgage will be funded based on the contractual price but the money for improvements will be held at the solicitor’s office until the work is complete. The lender will receive the inspection report from the appraiser and validate that the work has been completed in a good manner and as per the quotes provided. They will instruct the lawyer that they are able to release the funds to you, to pay the contractor. If the final costs end up being less than expected, the leftover money is applied back against the mortgage. Think this program might work for you? Contact me today for further details!