Transforming Budget Constraints: The Purchase Plus Improvement Program's Solution for First-Time Homebuyers

For many first-time homebuyers, finding a property that perfectly aligns with their preferences can be a daunting challenge, especially when constrained by budget limitations. Often, the homes within their price range may not fully meet their needs or aesthetic preferences. However, there is a solution that empowers these buyers to transform properties into their dream homes: the Purchase Plus Improvement Program

Enter the Purchase Plus Improvement Program, a valuable resource provided by select mortgage providers. This program offers a pathway for homebuyers to finance necessary renovations, even when faced with limited initial funds.

How Purchase Plus Improvement Works?

Under the Purchase Plus Improvement Program, buyers can secure additional funds, typically up to 10% , to a maximum of $40,000, of the post-renovation value of the property. To illustrate, consider a scenario where a home is valued at $300,000, with planned renovations expected to increase its value by $30,000, resulting in a post-renovation value of $330,000. In this case, the buyer can access up to $33,000 (10% of $330,000) to finance the renovations.

The Process

Utilizing this program involves a structured process to ensure transparency and efficiency. Before proceeding, buyers must obtain a written quote from a contractor outlining the planned renovations. Both the Canada Mortgage and Housing Corporation (CMHC) and the lender must then approve the proposed renovations. Additionally, it's advisable to include a provision in the purchase offer allowing the contractor to inspect the property.

Once the home purchase is finalized, the lender disburses the allocated renovation funds to the buyer's lawyer, who holds them in trust. These funds are released only after an appraiser confirms the completion of the renovations. Consequently, buyers need to arrange for a deposit or progress payments to the contractor during this period. A line of credit can serve as a temporary source of funds for these expenses.

Approval Considerations

While the Purchase Plus Improvement Program offers substantial flexibility, not all renovation projects will receive approval. Eligible improvements typically involve significant structural changes, such as kitchen renovations, that enhance the property's overall value. Conversely, projects like basement apartment additions or furnace replacements