Purchase Plus Improvements Mortgage in Ontario: Financing a Fixer-Upper

By Andrea Jolly | Mortgage Broker

How a Purchase Plus Improvements Mortgage Works in Ontario

Some homebuyers see potential in properties that need a little work. A Purchase Plus Improvements mortgage can allow buyers to finance certain renovation costs as part of their mortgage when purchasing a home.

This type of mortgage can make it possible to update or improve a property without needing to pay for all renovations upfront.

For buyers in Ontario, this option may help turn a fixer-upper into a home that better fits their needs.

What Is a Purchase Plus Improvements Mortgage?

A Purchase Plus Improvements mortgage allows buyers to include renovation costs in their mortgage financing when purchasing a property.

Instead of taking out a separate loan for renovations, the improvement costs can be added to the mortgage amount, subject to lender guidelines.

Typically, the lender approves both the purchase price and the estimated renovation costs as part of the mortgage.

How the Process Usually Works

Although each lender may have slightly different requirements, the process generally involves several steps.

1. Purchase Agreement The buyer enters into an agreement to purchase a property.

2. Renovation Quotes Contractors provide estimates for the planned improvements.

3. Mortgage Approval The lender reviews the purchase price and renovation plans to determine the total approved amount.

4. Renovation Funds Held by the Lender The renovation portion of the funds is typically held by the lender until the work is completed.

5. Renovation Completion After the improvements are finished, the lender may confirm completion before releasing the renovation funds.

Types of Renovations That May Be Eligible

The types of renovations allowed through a Purchase Plus Improvements mortgage may vary depending on the lender.

Common examples include:

• kitchen updates

• bathroom renovations

• flooring replacement

• roof repairs

• structural improvements

• energy efficiency upgrades

Luxury upgrades or non-permanent features may not always qualify.

Why Some Buyers Choose This Option

A Purchase Plus Improvements mortgage can offer several advantages for buyers who are comfortable with renovation projects.

Potential benefits may include:

• purchasing a home at a lower price and improving it over time

• customizing a property to suit personal preferences

• financing renovation costs through the mortgage instead of separate loans

This approach can allow buyers to create value in a property through improvements.

Planning a Renovation Project

Before pursuing a Purchase Plus Improvements mortgage, buyers should carefully plan their renovation budget and timeline.

Important considerations may include:

• accurate contractor quotes

• renovation timelines

• potential permit requirements

• unexpected costs during renovations

Working with experienced professionals can help ensure the renovation process runs smoothly.

Exploring Your Financing Options

Not every property or renovation project will qualify for this type of financing. Mortgage options may vary depending on the property, renovation plans, and the borrower’s financial situation.

If you’re considering purchasing a fixer-upper in Ontario, reviewing your options with a mortgage professional can help you understand whether a Purchase Plus Improvements mortgage may be suitable for your plans.