Purchase Plus Improvements: How can you renovate your new home?
When you are buying a home, sometimes you may want to do some renovations once you own the house. The Purchase plus Improvements program can provide you with this option.
The program allows you to add up to 10% of the purchase value in improvements. This means the house price will be increased so you need to pre-qualify for it at the new price.
Ex: you buy a home for $400,000 and want to do a deck or finish the basement for lets say $30,000. You would need to be pre-approved for $430,000 and your down payment is based on the new price.
These improvements must be permanent improvements to the home. You cannot buy furniture or appliances with this program. They must be permanent changes to the home.
The trick to the program
The program is great but has a couple of issues that can make it hard to take advantage off when needed.
You must have the estimates for all your renovations in writing and before you remove your financing conditions.
The contractor you hire to do the project must have the project 100% finished and inspected before any money is provided. This means you will need to cover any deposit the contractor requires.
You also must pay for the inspection with an appraiser. The normal cost is about $100 to $150.
You are allowed to pay for all the invoices yourself and then submit them once the project is 100% complete for inspections and payment. You can use credit cards or lines of credit or cash to cover these expenses.
Once the project is finished and inspection is done, the lender will then release the cash to your lawyer. The lawyer then cuts you or your contractor a cheque to cover the costs.
If you do not use all the funds in the estimates your mortgage is modified to reflect this.
A great program when you want new floors or the basement developed immediately.
You only need to be aware of the program details and how they work.