The Purchase Plus Plan lets you add the cost of upgrades to your mortgage before you move in! Eligible upgrades include – a new electrical service, a new roof, central air, a new furnace, new siding, eaves, soffits, fascia, doors, windows, a new kitchen, carpeting… or any other renovation that would increase the value of the home.

 

The way it works is like this… Let’s assume that you are a first time buyer and have 5% down payment. Before the mortgage financing is arranged, written quotes are obtained from licensed contractors for the repairs and or the improvements to be done to the home. When the application for mortgage financing is made, the request is made for up to 95% of the purchase price PLUS up to 95% of the cost to complete the improvements.

Note: The lender will “hold-back” on closing the “improvement” portion of the mortgage until the work has been completed, normally within 30 to 60 days of closing. Once the work has been completed, the lender will advance the balance of the funds and the contractor can be paid.

 

What does this mean? let me give you an example. . .

The purchase price is: $150,000 X 95% = $142,500
The quote for the improvements is: $ 11,000 X 95% = $ 10,450
Total Mortgage is: $161,000 X 95% = $152,950

 

Therefore, an application is made for a mortgage in the amount of $152,950 which is 95% of the purchase price plus 95% of the improvements.

 

On closing this is what happens… The Mortgage advanced to complete the purchase is $142,500 plus the original 5% from the purchasers down payment ($7,500) sufficient funds to complete the purchase of $150,000.

 

After closing the contractor completes the improvements (normally within 30 to 60 days after the closing) the lender advances the hold-back of $10,450, the purchaser pays the additional 5% of the cost of the improvements ($550) and the $11,000 owed to the contractor can be paid as per the original quote for the work.

 

And you will get $11,000 of improvements done to your home with a cash outlay of only $550 (the balance was financed with your mortgage)!

 

Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (905) 265-0246.

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