Purchase Plus Mortgage
Are you searching for a new home in a great neighbourhoods but can’t find exactly what you are looking for? There are so many fixer uppers on the market.
Home buyers often find the perfect home on a great lot in a preferred neighborhood. They love the floor plan and the number of bedrooms but they pass on the home due to the need for renovations.
There is a solution. A mortgage produced called Purchase Plus Improvements (PPI).
Renovations included an updated kitchen or bathroom, new hardwood floors, windows, a new roof, a finished basement, or fresh coat paint and new carpet. This program is for simple renovations not major renovations that include structural changes.
HERE ARE THE BASICS
The renovation should be no more than 10% of the “as improved value” and to a maximum of $40,000. If the home is purchased for $350,000 and the improved value is $400,000. The renovation budget can be a maximum of $40,000.
Obtain a quote from a licensed contractor for all of the costs associated with the renovation. The offer to purchase and the renovation quote are submitted to a lender and the mortgage financing is approved based on the “improved value” of the home. In this case $400,000.
Often an appraiser completes an “as is value” and an “improved value” assessment to ensure the renovations will add the expected value.
The home buyer needs to have a minimum of 5% down payment available. The down payment is based on the “improved value” of $400,000 so $20,000 in down payment.
It’s important the home buyer has the ability to source the funds needed for the renovation while the work is being completed (a line of credit, or loan, funds borrowed from family, or a contractor with the ability to complete the project and collect payment once it’s completed – often a deposit is required at the start of the project).
Once the renovation is complete an appraiser confirms the exact renovations from the contractor quote were completed, and the appraiser’s assessment and the contractor’s invoice are forwarded to the lender and the lawyer.
The renovations funded are advanced by the lawyer the home buyer received the funds and can puts the funds towards the cost of the renovation.
MAKE SURE TO
Work with a reputable contractor, window and siding company. Ensure that the contractor or company is certified, works with you to obtain the appropriate plans and permits, and has a very good reputation.
is completed. A new kitchen can’t be exchanged for a basement development so make a plan and stick to it.