When you find a house that’s got potential but needs some work, it’s easy to feel stuck if you don’t have the cash for renovations. But there’s good news: you can add renovation costs to your mortgage before the work even begins. This is made possible through a program known as Purchase Plus Improvements.
I’ve personally used this program twice, and it’s transformed not just the look and feel of my homes, but also their value. Here’s a breakdown of how it works and why it could be a game-changer for you.
In a nutshell, Purchase Plus Improvements lets you roll renovation costs into your mortgage. You can use this program to make your home livable right after you close, without dipping into your savings. The key is that you can increase the property’s value by making smart improvements, like updating kitchens or adding rooms.
How much can you borrow?
But first, you need to qualify for the total amount, including the cost of renovations. Make sure you’re pre-approved for the mortgage amount plus renovation costs.
1. Get Pre-Approved:
Ensure you’re pre-approved for the total amount (house + renovation costs).
2. Get Quotes:
Before you close, get a detailed quote for the renovations from a contractor. This is crucial because it shows the lender you’re serious and helps set clear expectations for the project.
3. Submit Your Plans:
Once you have the quote, submit it to your mortgage broker and lender for approval.
4. Complete the Work:
After you’ve closed on the home, the next step is to get the renovations done. You’ll need to pay for the work upfront using savings, credit cards, or lines of credit. Once the work is complete, you’ll get an appraisal.
"The lender wants to make sure you did what you said you were going to do. No cutting corners."
5. Get Paid:
After the appraisal confirms that the work matches your original plan, the lender releases the renovation funds to you. Use the money to pay off any credit or loans you used to front the renovation costs.
Here are a few lessons I learned after using this program twice:
1. Have Your Team Ready:
Line up your contractors before you close on the house. Having trusted people ready to go makes the process a lot faster and smoother.
2. Plan Your Finances:
Make sure you have enough credit or cash on hand to cover renovation costs upfront. You’ll get reimbursed once the work is done and approved, but until then, you’ll need to handle the expenses yourself.
3. Stick to the Plan:
Your lender will require you to stick to the renovation plan. If you don’t complete the approved work, they won’t release the funds.
I can’t emphasize enough how underutilized this program is. By using Purchase Plus Improvements, I was able to significantly increase the value of my homes. In one case, I added a basement suite and did major renovations that nearly doubled the home’s value.
"We increased the property’s value by over $100,000—far more than we spent on the renovations."
This program is a fantastic opportunity to buy a home at a lower price, invest in renovations, and increase its value. It’s especially useful if you’re looking to get more out of your investment in the long run.
If you’re thinking about buying a home that needs some TLC, don’t let renovation costs hold you back. By adding the renovation costs to your mortgage, you can get the home you want and increase its value at the same time. Just make sure you’re working with a mortgage broker who knows the ins and outs of this program.
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