Transform Your Home with a Purchase Plus Improvement Mortgage
Purchase Plus Improvement Mortgage in Alberta: A Guide for Homebuyers
When buying a home in Alberta, you may come across properties that are almost perfect but need a little extra work to meet your standards. This is where a Purchase Plus Improvement mortgage comes into play. A Purchase Plus Improvement mortgage allows you to finance both the cost of the home and the cost of renovations in one convenient mortgage. If you're looking to buy a home that needs some upgrades, this type of mortgage can be an excellent solution to transform your property into the home of your dreams without having to arrange separate financing for renovations.
Here’s everything you need to know about Purchase Plus Improvement mortgages in Alberta.
What Is a Purchase Plus Improvement Mortgage?
A Purchase Plus Improvement mortgage is designed to help homebuyers finance the cost of both the property purchase and the improvements they want to make, all under one mortgage. This allows buyers to complete necessary renovations, repairs, or upgrades soon after closing, with the costs rolled into their mortgage payments.
In Alberta, this type of mortgage is offered by many lenders and is an ideal solution for buyers looking at homes that require immediate updates, such as:
Kitchen remodels
Bathroom upgrades
New flooring
Energy efficiency improvements (e.g., windows, insulation)
How Does a Purchase Plus Improvement Mortgage Work?
The process of securing a Purchase Plus Improvement mortgage is straightforward but involves a few extra steps compared to a traditional mortgage. Here’s how it works:
Get Pre-Approved for a Mortgage: Like any mortgage application, you need to be pre-approved based on your income, credit score, and other factors. This will give you a baseline of how much mortgage you qualify for.
Get Quotes for Improvements: Before submitting your mortgage for approval, you'll need to obtain detailed quotes for the renovations or improvements you plan to make. This ensures that both you and the lender understand the scope of the work and the costs involved.
Include Improvement Costs in Mortgage: Once you have the quotes, the lender will approve a mortgage amount that includes the home’s purchase price plus the estimated cost of the improvements. Depending on the lender, this can range from $40,000-$100,000.
Complete the Renovations: After closing the mortgage, the renovation funds are typically held in trust with your lawyer. Once the improvements are completed, and an inspection confirms the work, the lawyer releases the funds to cover the renovation costs.
Incorporate the Costs into Your Mortgage: The cost of the home and the renovations is rolled into one mortgage payment, making it easier to manage financially compared to taking out a separate loan.
Benefits of a Purchase Plus Improvement Mortgage
One Mortgage, One Payment: With a Purchase Plus Improvement mortgage, there’s no need to take out a separate loan for renovations. All the costs are bundled into one mortgage, making it more convenient to manage.
Increased Property Value: The renovations you complete using a Purchase Plus Improvement mortgage can significantly increase the value of your home, often leading to a solid return on investment if you sell later.
Lower Interest Rates: Compared to other financing options like personal loans or credit cards, a Purchase Plus Improvement mortgage typically offers much lower interest rates, saving you money in the long term.
Immediate Upgrades: You can move into your new home knowing that the upgrades and renovations you want are already planned and financed. There’s no need to live in an unfinished space or wait years to start making improvements.
Eligibility for a Purchase Plus Improvement Mortgage
To qualify for a Purchase Plus Improvement mortgage in Alberta, you’ll need to meet the standard mortgage eligibility criteria, including:
A good credit score: Most lenders require a credit score of at least 680.
Home must be owner occupied
Stable employment and income: Lenders will assess your ability to repay the loan based on your income and employment history.
Down payment: A minimum down payment of 5% is required for homes under $500,000.
Some lenders will allow the borrower to complete the work themselves but may limit the improvement value.
Things to Consider
Renovation Timelines: Lenders often require the renovations to be completed within a certain time frame, usually within180 days of closing, some lenders allow up to 270 days with an insured or insurable mortgage.
Additional Inspections: To release the funds, lenders typically require a follow-up inspection to ensure the renovations have been completed as outlined in the quotes.
Planning the Right Renovations: Be sure to focus on renovations that add the most value to your home, such as kitchens, bathrooms, and energy efficiency upgrades.
Conclusion
A Purchase Plus Improvement mortgage is an excellent option for homebuyers in Alberta looking to invest in a property that requires upgrades. By including the renovation costs in your mortgage, you can finance both the home and improvements with one loan, making it easier to manage and budget for. If you're considering buying a home that needs some TLC, a Purchase Plus Improvement mortgage can help you turn it into your dream home.
Ready to explore your options for a Purchase Plus Improvement mortgage? Contact me today to learn more and get started on the path to homeownership with the flexibility to renovate.
