In 2014, Calgary mortgage broker Steven Crews, from Verico iMortgage Solutions, did a series of radio broadcasts about mortgages and mortgage financing for Shine FM. Have a listen and you’ll pick up some helpful tips…
“What do you mean, home purchase with improvements”? I often hear from home buyers, first time home buyers and otherwise. They’d say, “I didn’t know that I could include the cost of my home improvements into the mortgage when I purchased a home!”
Yes, it’s possible and there is a name for it. We call it, Purchase With Improvements…
Many people say it’s tough to find a home that has everything that they’re looking for. Sometimes they love the home but there’s no garage or it needs a new paint job. The home buyers don’t have enough money to buy the home and then pay for the renovations they need.
But did you know… You can actually finance the total cost of the purchase of your home plus the improvements with one mortgage up to 95% of the total cost. This means that you just have to save 5% of the total cost. Let’s say you found a home that is listed for $375,000 and you need to spend $25,000 to build a garage and redo some of the flooring. We can finance up to 95% of the total cost of $400,000 and therefore you would invest just 5% into your home purchase without having to save additional money for these improvements.
There are stipulations:
- The bank will only finance the lesser of the appraised value or the total cost. If the improvements only increase the value of the home by just $15,000 and not $25,000, then you may have to make up the difference. In this case, you would have to pay the extra $10,000.
- The lawyer will hold onto the extra funds until you confirm that the improvements are completed.
If you want to include the cost of the improvements when you purchase your home, then you need to get quotes from a contractor or the service provider. These have to be reviewed by the lender up front. The total cost to purchase and the improvements will be reviewed by the lender and the insurer. You will know how much financing will be available before you remove your home purchase conditions.
If you decide to change contractors to complete the improvements, then you must let the bank know so that they can review the request again. Therefore, you have to give your lender adequate time before the possession date to review the new request.
Home purchase with improvements is an excellent way to get the home you want and make it just right for you!
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