September 27, 2023
https://peterpaley.com/purchase-plus-improvments-mortgages/
Purchase Plus Improvements is an excellent but underutilized program, especially in our Manitoba real estate market.
The program allows a homebuyer who is applying for an insured mortgage (usually less than 20% down) to include up to $40,000.00 of home renovations or improvements in the mortgage.
Typically the eligible types of improvements are cosmetic (kitchen, bathrooms, flooring, paint), mechanical (furnace, air conditioning, electrical), and exterior maintenance (windows, doors, roof). Ineligible improvements would typically be foundation repairs. The general rule is the renovation should add value to the home.
Why is the program underutilized? This could be stemming from a number of different factors;
1. The program is generally not well known.
2. The renovation quotes need to be provided upfront at the time the application is submitted for approval. This means that the homebuyer needs to have the quotes done even before writing an offer.
3. The real estate market over the last 10 years has not allowed for the required time to get quotes and due proper diligence on a home purchase. The market has heavily favored sellers, and multiple offers were almost always expected.
4. The purchase plus process adds more work for everyone. The REALTOR will need to spend more time helping arrange quotations, the mortgage broker will need to do more calculations and follow-ups with the clients post-funding, and the lawyer will also need to hold the renovation funds in trust until they are completed, inspected, and approved by the lender.
5. The homebuyer will need to have the financial means to cover the cost of the renovations to completion because the lender won’t allow the renovation funds to be released until they are completed, inspected, and approved.
It may be a bit of a hassle. However, in today’s changing market where interest rates and home prices remain higher, mortgage qualification policy remains stagnant and unhelpful, and the market balances itself and dare say moves to a buyer’s market, the Purchase Plus Improvements Program is an EXCELLENT way for a homebuyer to get an improved home they want in a location they want.
Contact us for more details!
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