How to Get a House You Want… with the Kitchen You Want

I am sure some of us have been there… passing on potential houses just because the bathrooms or kitchens were not up to our standards, likes or what not. But rest assured – there is a solution to this and it’s called Purchase Plus Improvements. And yes, men like kitchens too.

Purchase Plus Improvements is a program offered by most of the lenders, irrelevant of whether you’re putting more or less than 20% in downpayment. While the program slightly differentiates from bank to bank, the underlying idea is the same: it allows you to put the cost of your renovation into the mortgage.

Here’s how it works…

You find the property. Let’s assume the purchase price is $700K and you have 20% down payment. Your standard mortgage would be $560K, or 80% of the value. You then call a couple of contractors and ask them for written quotes on how much it will cost to put a new kitchen in. Let’s assume the cost is $40K. Your mortgage broker then submits the application to the bank along with the quotes. The bank approves the mortgage based on the improved value of the property, i.e. $740K. If you maintain the 20% downpayment, your new mortgage becomes $592K. You’ve just added 80% of your total renovations to your mortgage.

You should be aware that the renovation funds will be held by your lawyer until all renovations have been completed. The bank will ask for an inspection to ensure everything that was provided in the quote was completed. For this reason, you have to ensure that you have access to some money to start the your renos, or find a contractor who can wait for the payment after the completion.

While most of lenders limit the program to 10% of the purchase price, up to a maximum of $40K, don’t worry – there are lenders that will make an exception where it makes sense (like in the GTA, right?). Types of renovations can include bathrooms, basements, flooring – pretty much all common sense cosmetic and/or structural improvements.

And, no – you don’t have to use the contractors who originally quoted you to do your work. It could be the proud uncle who was in Cuba at the time your quotes were due. Or you can do it yourself. But give the original contractors a chance, it’s fair enough.