The Purchase Plus Improvements mortgage is a great option for many people in this situation. They get credit for the increased home value right off the bat, they get their money at a great interest rate, and they get to complete the upgrades right away and live in the home they really want!
With 80% loan-to-value being the maximum you are now able to refinance your property, property for values increasing at a slower rate, and 25 years being the maximum amortization on high ratio deals, it’s not as easy as it once was to simply refinance and pull some money out of a home when it’s time for some upgrades.
In addition to the above, it seems that many of the new homes being developed lack a decent sized yard for the average family to live in and enjoy. Many of my clients are facing the dilemma of buying a new home with all the bells and whistles, but a lackluster yard or, purchase an older home with a yard that their kids and pets can enjoy, but face the reality of having to upgrade or renovate the home they purchase.
It ranges what lenders will offer the Purchase Plus Improvement program so be sure to let us know if this is something you are interested in. Also let your Realtor know so there is enough time during subject removal period. Having to get quotes from contractors can often take more time.
Here’s how the program works:
* The amount allowed for improvements is typically 10% -20% of the purchase price, or up to $40,000 maximum, sometimes $50,000 on exception. The money is to be used for “improvements” or “upgrades”, not necessary repairs like leaks or structure issues. It also must be for something that adds value to the home, not a chattel like appliances. It has to be a permanent fixture to the home.
* You need to get quotes for the cost of the improvements that you wish to complete prior to your subject removal. Add the amount of the quote(s) to the purchase price, and this becomes the new purchase “value” of the home that the lender will approve you based on. The down payment is now based on this new higher value as well.
* The mortgage is funded based on the contractual price, but the money to be used for improvements is held at the solicitor’s office until the work is complete. In this case, you may need to find a contractor that will bill you at the end or have an alternate source of funds for the renovations.
* The work can be done by yourself or a company/contractor, but sweat labor is not something that can be reimbursed for. If you do the work yourself, only the cost of the materials is released. If a contractor or company does the work, simply provide the invoice and they will be reimbursed directly for the full amount.
* You can not change the scope of work after it has been approved and funds will only be released provided the work is complete that you initially intended on.
* An inspection report from an appraiser is required when all is done so the lender can confirm that the said work was completed and is of good quality.
* If the final costs end up being less than expected, the left over money is applied back against the mortgage.
This program is available at the best rates, both fixed and variable, and may help to make it easier for you to decide which home is best for your family.
Think this program might work for you or someone you know? Call our office for further details!
