Something missing from that new house you just looked at? Let me show you a way to have your perfect home.

This week there has been bidding wars, homes have been sold in a day with multiple offers.  We are looking like another Calgary boom in my humble CIBC Mortgage advisor opinion.  

The question then becomes, do you want to go to war and try to outbid someone for the perfect home?   Or would you consider a fixer upper if you knew I could find a way to renovate it and put that cost into your mortgage?   Why not try for that home that might have been overlooked?  Instead of buying someone else’s dream home you can turn that home that needs a little bit of extra love and make it your dream home.  

I understand the let’s fix it up mentality, as this was one thing my father, and my grandpa had in common.   They loved to fix things up, take things apart and put it back to together in a new an often better way.   This in its own right, is worthy of its own post.   I will get into that one day.

Why buy a house that needs upgrades?  Why buy a place with a less than perfect kitchen, or bathroom?  Why buy a place that is missing a certain type of marble counter top, or did not have two sinks in the bathroom.

Well, often it’s priced knowing that it’s less than perfect.  Did you know that 80% of people walk away from a home because of one small detail?  That leaves just 20% with the imagination, the cash reserves or the knowledge that they can fix up this property and finance it into their mortgage.   You don’t have to keep on shopping for a perfect house which might be far more expensive.

 

It’s called the purchase plus improvement program and it available with 5% down through CMHC, Genworth, and Canada Guarantee.   Each have different guidelines which we will go over below.

How does the purchase plus improvement program work when buying a home?

1.   You can finance on top of your mortgage up to 20% of the “as is” purchase price of your property for improvements after closing so long as it does not exceed $40,000.  You can have more more under one of the programs.

2.   The allowable improvements are vast: Anything that you can’t remove from the property like a dishwasher, or fridge, UNLESS IT’S A BUILT IN.  Complete remodel of kitchens, roof, bathrooms, flooring plumbing, and electrical are often the goal of these projects.  Not allowed is fixing something like a furnace that should have been working in the first place!

3.   The property must be appraised based on current value and then on value after improvements.

4.   We get a couple of bids from contractors, and the lenders approves one.  The funds are held with the solicitor until the work is completed, which means that unless you have the cash upfront we have to make sure we use one that will take payment from the lawyer when it’s complete.  Left overs go back to the lender and applied back on the principle.

What are the benefits and strategies to using the Purchase plus improvements program?

Perfect for that one little issue you might not like, or needs to be improved.

Ideal for first time home buyers that do not have the additional funds for improvements after closing and cannot afford the upgrades they desire to modernize or improve their new property. Not to mention, you are immediately increasing the value and equity in your property and spreading the cost over a 25 year amortization in your mortgage.

These three improvements programs give you the ability to look at homes that need a little more love.  You can actually build up several thousands of dollars in equity using this process.  This was instead of buying a home that has already been renovated the way someone else loved and for their ideals it’s then all about you. Why pay more for something that you don’t think is perfect? Just include the renovation costs in your mortgage loan and renovate to make it yours!

What is the fine print in the purchase plus improvements for each insurer?

Each insurer is different when it comes to premiums, Loan to Value, Amortization, and eligible properties, and they are very competitive in most cases.

There are difference when it comes to how much money you can get from them as well.

• CMHC Improvement: 

  10% cap on the as improved market value they will put into the mortgage.  Currently they don’t have a cap for dollar amount but will not insure over 1 million, with a 2.75% premium, and if you have a non standard down payment its 2.90%

• Canada Guarantee Purchase Advantage Plus: 

  Full Appraisal required for improvement exceeding 20% "as is" value of $40,000.  This premium is 2.9% for 5%

• Genworth Purchase Plus Improvements: 

  20% of initial value not exceeding $40,000.   Government grants will be considered if pre-approved. With a 2.75% fee with 5% down.

Just remember that you will have to tell your realtor to add a condition in your Agreement to Purchase that says you want a contractor to inspect the home before closing. Then the contractor will provide a quote that breaks down the work and the costs.

Tell your realtor that you want to do purchase plus improvements and get them a Mortgage Advisor who knows how to structure the deal and who to call to get things done.  Yes, I am always more than willing to help clients through the process, all for the very low fee of nothing at all.

Dependably yours,

Michael