You like the property, but it needs work. A purchase plus improvements mortgage adds that cost to the loan, based on the value once the work is done.
You finance the kitchen at the mortgage rate instead of on a credit card. The constraint sits elsewhere: the funds are held by the notary and released after the work is completed.
Plan my purchase with renovationsThat’s almost always where the program snags. Renovation money isn’t released at possession: it waits until the work is done and verified. In practice, you have to be able to pay the contractor up front, or have a contractor willing to wait.
Many buyers take possession, then pay for renovations on a line of credit or a card, at a notably higher rate. Purchase plus improvements isn’t offered by every lender and the rules vary: eligible amounts, types of work, deadlines. I go to the ones who offer it and confirm the eligible work list before you commit to any contractor.
What’s necessary, what’s wanted, and what adds value to the property.
Signed, priced, with a schedule. A list of intentions isn’t enough: the lender wants contractor figures.
The appraiser estimates the property once the renovations are complete; that value determines the financeable amount.
You have the work done, the inspection confirms it, then the notary releases the holdback.
The holdback is released once renovations are done and verified. So the work has to be funded in the meantime: your cash, an arrangement with the contractor, or a combination. That’s the question to settle first.
The holdback matches the amount approved at the start and doesn’t adjust along the way. In a property being renovated, surprises are the rule: I recommend building a contingency into the quotes rather than aiming at the exact figure.
The lender pays me at funding, as on an ordinary purchase. You’ll have the usual transaction costs (legal fees, appraisal, inspection) plus, sometimes, a second appraiser visit to confirm the completed work. What it costs, in detail
A renovation budget is built from quotes, a schedule, and an allowance for what gets discovered once the walls are open.
The cap depends on the lender and program, often expressed as a percentage of the as-improved value. The amount must be supported by detailed, signed quotes. A list of intentions is not enough: contractor figures are required.
Some lenders allow it for a limited portion, but labour is generally not financed, only materials, documented with invoices. For structural work or anything touching plumbing and electrical, a licensed contractor is usually required.
Generally work that adds permanent value: kitchen, bathroom, roofing, windows, flooring, systems. Furniture, appliances, and decorative landscaping are often excluded. I confirm the list with the lender before you commit to anything.
The lender sets a deadline, often 90 to 180 days after possession. Running past it can complicate the release of funds. So the contractor’s schedule should be verified before closing, not after.
For a purchase with immediate work, this program finances at the mortgage rate rather than a line-of-credit rate, which costs less. For renovations on a property you have owned for years, a line of credit or refinancing is often simpler.
Major banks, credit unions, and specialized lenders each apply their own criteria, products, and terms. A logo does not mean that a mortgage will be offered or approved.
