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Many homebuyers looking to buy older properties find themselves in a common predicament: they’ve found a property that suits them, but it needs some costly and immediate upgrades. Increasingly, buyers are adding the costs of those immediate renovations into their mortgage, instead of racking up credit card bills or selling investments to pay for the upgrades. Known as a “purchase plus improvements” mortgage, this type of mortgage covers the sale price of the home, plus any renovations that would increase the value of the property, with as little as 5 per cent down.

If you’re buying a home but want to add a second storey, finish a basement or redo a kitchen, it can make a lot of sense to add those costs to your mortgage. That way you can spread your payments over the life of the mortgage and have a cost-effective way to get your dream home. You can also use your pre-payment privileges to pay the renovation off faster.

The process is quite simple:
  • Obtain cost estimates for the upgrades
  • Get your appraisal – for the value of the property “as is” and the estimated value of the property once the improvements are completed
  • Renovation costs are included in your mortgage
  • Complete your upgrades
  • Renovation funds are released by your solicitor upon completion

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