Often home buyers find the “perfect” house but if only it had… a new furnace or a new kitchen or new flooring or… or… or… With a “Purchase Plus” mortgage product, a buyer can get these costs included in the mortgage!! In fact, there are products available for current homeowners that want to improve the house they already own as well.
With a Purchase Plus mortgage, the buyer collects at least 2 quotes for the work they would like to have done on the new property. The costs should stay less than 10% of the purchase price to a maximum of about $40,000 (Any amounts over that will require you to get a Construction mortgage). This amount is added to the purchase price for Bank purposes. The down payment requirement (minimum 5%) is based on this new amount and the mortgage makes up the difference.
If the file is approved, on closing day, the funds to purchase are released to the seller and the construction amounts are held back in the lawyer’s trust account. You have about 90 days to prove the renovations are complete (either by paying for an appraisal or by submitting all of the invoices for the work – each lender requires a different proof) and the lawyer releases the funds to you. Homeowners can do the work themselves or hire a contractor. Often a contractor will complete the work and wait for payment until the lawyer releases the funds to you. Keep in mind that you are paying mortgage payments on the full amount during this process.
The same option is available to homeowners that want to do renovations to their existing home with the exception that the maximum amount that is available is 80% of the value of the home after renovations are complete.
To discuss your mortgage options or for more information, feel free to make an appointment or apply online at jmacdonald.ca.
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