Have you ever fallen in love with a home, but just absolutely cannot stand the carpet in the living room? The kitchen cabinets are too outdated? The furnace or shingles need replacing immediately?

Rather than dismissing that particular property, consider utilizing the purchase plus improvement product! Allowing you to end your house hunt, and work towards making your dream home a reality.

Although every lender and mortgage insurance company has a slightly different twist to the purchase plus product, the basics remain the same:

• This product cannot be utilized for hot tubs, appliances, pools or removable chattels.
• However, this product will provide funds for practically any other renovation project you may have in mind!

Common threads to all lenders and insurers:

1. A maximum dollar limit allowable for the renovations: 10-20% of your purchase price.
2. You will require an estimate/ quote on the renovations you are planning to complete – most lenders require a certified contractor to draw up the quote.
3. A maximum time limit for completion of the renovations: most common is a 90-120 day limit from the closing date of the purchase. Note that exceptions have been approved in the past on a case by case basis.
4. The renovation dollar amount is added to the total purchase price and your new down payment reflects the new price (i.e. A $200,000.00 home with 20% renovations or $40,000.00, now requires a minimum down payment of $12,000.00 rather than $10,000.00)
5. You must qualify for the new mortgage loan amount which includes the renovations.
6. On closing, you only receive funding on the original (pre renovation) price tag of the home. The renovations are then completed whilst your lawyer holds the funds for the renovations in trust until they are proven complete.
7. Proof of the completion of the renovations must be provided to your mortgage agent: some lenders permit clients to submit receipts along with a photograph showing the completed work but most lenders require an inspection (approximately $100-$200 cost) to be completed by a certified appraiser confirming that quoted work is done. Most lenders have a dollar figure limit under which they will accept receipts versus an inspection.
8. Even though funds for the renovation have not yet been advanced, you begin paying on the total mortgage loan amount from inception.

When the product differs from one lender to the next as well as one insurer to the next:

• You must ensure you are working with an agent that is knowledgeable regarding policies and procedures on this product such as an agent from the Welch & Co Mortgage Professionals team.

Instances where this product can be utilized incorrectly and surprise you negatively due to expectations not being met:

1. some lenders require the work be completed by the contractor that submitted the original quote/ estimate: these lenders will confirm this by contacting the contractor once the renovations are complete to ensure they did in fact finish the quoted renovations.
2. Many lenders do not permit the work to be completed by the homeowner – work must be done by a certified contractor.
3. Many lenders are now providing the original quote to the appraiser in order to ascertain every project is completed in accordance to the quoted estimate – this means, for example, if you received a quote for hardwood flooring, you cannot substitute with laminate flooring…
4. Quotes are better to be “less” detailed on the subject of specific brand names and/ or products to avoid potential discrepancies at the time of inspection – granite counters are not the same as laminate counters in value nor in marketability.

Incomplete renovations:

Lenders are somewhat flexible if the nature of the work differs slightly from the original quote/ estimate however, ALL reserve the right to cancel the disbursement of funds that are held in trust with your lawyer. Most permit the funds to be utilized as a prepayment on the mortgage if renovations are not completed in accordance to their expectations however, every lender reserves the right to cancel the mortgage in its entirety should they deem the situation unacceptable.

*** No matter whom the lender is, you either must assume the cost of the renovations temporarily until completion of the project: the Welch & Co team can assist you with lines of credit for this interim or clients can utilize existing cash or credit cards in the interim, or request that the contractor be paid only on completion of the project, as funds will be disbursed only once the renovations have been completed.

Should you wish to utilize this product, make sure you are working with experienced mortgage agents who can accurately select the lender and insurer to meet all your expectations and needs. Ultimately, if this goes awry, it will potentially affect your reputation. Ensuring your needs are met and no undue surprises arise should incent you to meet with the Welch & Co Team – this guarantees a smooth transaction and ultimately, keep you happy and satisfied! 🙂