Finding a perfect move-in ready home in your budget isn’t always a reality, especially in a hot housing market. Many times, that almost-perfect house can become your dream home with just a few repairs or renovations.

But with your savings earmarked for your down payment, what if you need more cash left to fund the renovations?

Homeownership can still be a reality with a purchase plus improvements mortgage.

What is a purchase plus improvements mortgage?

Rolling your renovation costs into your mortgage is one of the most cost-effective ways of financing a reno project. The purchase plus improvements mortgage lets you do just that.

If this mortgage didn’t exist, you would have to take three separate steps to achieve the same outcome:

1. Buy your new home.

2. Live in it long enough to see growth in your equity.

3. Refinance your mortgage and use the proceeds to pay for the renovations you want.

This mortgage gives you the bank’s blessing for doing some specific renovations upfront, and they’ll approve and finance the entire process, all under the same rate and payment.

There are a few quirks and conditions you must be mindful of, like the sort of renos you’d like to do, the timeline of the advances, and the total project cost limits different lenders have under this mortgage.

However, if you play your cards right, you could buy your dream home and renovate it exactly as you like, arranging all the financing ahead of time and at a great cost.

How does a purchase plus improvements mortgage work?

To get purchase plus improvement financing, you must first identify the work you want to do on the house you plan to purchase. Perhaps the home needs updates to the electrical system, a roof repair or even a kitchen renovation.

The next step is finding a contractor to estimate the repairs or renovation costs. Getting a few quotes is essential to ensure a fair price. You’ll need to provide a firm price to proceed.

Many brokers and even some lending institutions won't touch this product because there are many moving parts. However, I will guide you through the program to maximize your chances of approval.

Immediately following the closing of a sale and taking possession of your new home, you can begin the renovations you agreed to.

Is a purchase plus improvements mortgage right for me?

If you've found a home you'd like to purchase but don't have the liquid cash to make the necessary repairs or renovations, then a purchase plus improvements mortgage could be right for you.

Contact me to learn more about how I can help you turn that almost-perfect house into your dream home.

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To start, you need to understand the basic math of investing. You either buy low and sell high, or you buy well and keep for a while. Ask yourself, which one do you want to do, and how will your numbers look? Together, we can work out some scenarios and prepare you for your search.

Cash flow is what you make every month minus what you spend. What you spend every month should include a buffer for any unplanned expenses (which you should be saving up for anyways). Positive means you’re in the plus and visa-versa.

The bank views cash flow-positive property as a more robust investment and is more likely to lend preferentially against it.

How do you estimate and budget for cash flow? That’s a more extensive conversation that we can have.

Every investment comes with its own set of risks. We can consider mitigation strategies to help you manage some risks, but not all are inherent in a given investment. Real estate is no different. The plan you choose will have its own set of risks. How you manage or minimize them will depend on your unique approach.

Buying a property out-of-the-box means you’re not inheriting old problems, and the place will come with a warranty. As they say, the new car smell is never free.

An upfront conversation about your numbers can put some of these elements into perspective and help you plan your real estate portfolio around your goals, abilities, and lifestyle.

The answer is it depends. First, you should ask at least three people: your accountant, mortgage broker, and lawyer. There are considerable implications of doing so, but I’ll stay in my lane and speak only to the borrowing ones.

When you finance a property held in a holding company, there are rules you have to follow. In addition, you will:

  1. Limit your choice of lender and product options.
  2. Incur costs and be bound by some additional conditions of financing.
  3. Forfeit some privileges you may be otherwise entitled to when buying a property as an individual. And notwithstanding all of the above, it still makes sense to go the hold-co route for some specific scenarios.

Call professionals, take good notes, and run some solid numbers to make sure this makes sense for you - before you make a move. Ask to be referred to tried and true professionals who can help you improve the quality of the answers you get.

Investment concepts, where the outcome hinges on elbow grease or downright speculation, are often harder to sell to a lender. These projects will hold the operator (you) to a higher standard of financial ability to service this debt should your project hit choppy waters.

In contrast, opportunities, where properties have a strong cash flow and a solid long-term value projection, will be a lot easier. Financing costs will be lower, and the emphasis will be placed on the property itself rather than its investors.

A home equity line of credit (HELOC) is secured credit. Your home acts as a guarantee that you will repay the money you borrowed.

Up to a maximum credit limit, you can borrow money, repay it at your discretion, and borrow again. It typically comes with higher rates than their regular mortgage counterparts. You can best use them for consolidating short-term and/or recurring costs.

There are other factors to consider, and every situation is different. Talk to a professional to help weigh your options.