Finance Home Upgrades with a
Purchase Plus Improvements Mortgage
If you intend to buy a home that needs some immediate upgrades, a "purchase plus improvements" mortgage may be right for you. This type of mortgage covers the purchase price of the home, plus any renovations that would increase the value of the property, such as finishing a basement or redoing the kitchen. For current homeowners, a "refinance with improvements" option may be available.
Let us guide you through the process:
Step 1: Mortgage pre-approval
Arranging a pre-approved mortgage not only protects you if interest rates increase, it also gives you a clear price range for your new home.
Step 2: Obtain cost estimates for upgrades
Once you have found a home, you need to get written quotes from licensed contractors on the renovations you plan. These quotes will be used as the estimate for renovation funds that will be forwarded to you after the projects are completed.
Step 3: Mortgage application
When you are applying for the mortgage, your lender will add the estimated costs of the renovation into the lending agreement. For example, with a 5% down payment, your mortgage broker would apply to a lender for 95% of the "as improved" market value, which will be higher than the actual purchase price.
Step 4: Finalize purchase
Your Realtor and mortgage broker will walk you through this part of the process. The funds for renovations will be sent to your lawyer "in trust" when the mortgage closes.
Step 5: Complete upgrades
The lender will "hold¬ back" funds for the renovations until the work has been completed and inspected, at which time the contractor can be paid.
Interested in learning more about this innovative mortgage option? Contact us today.