Purchase Plus Mortgages

Purchase plus mortgages have been around for years, but many people are either unfamiliar with them or do not know what they are. To put it simply, purchase plus mortgages allow you to access additional funds for the purposes of upgrading your new home.

Lets say you want to buy a $400,000 condo that currently has the original flooring, cabinetry, and fixtures in place from when it was first built in the 1980's. You want to put down 5% of the purchase price and have a mortgage of $380,000 plus any applicable mortgage insurance premiums. What you can do with a purchase plus mortgage is request an additional dollar amount equal to the same amount needed to complete the upgrades you wish to have done to that property. These changes cannot be structural such as moving and taking down walls but can include wall color, cabinets, kitchen appliances, bathroom fixtures, flooring, etc.

What you need to do is go to any hardware or home supply store and get quotes showing all materials, product costs and labor costs required to make and install these changes. What will happen after that is an appraisal will be ordered showing the current market value of the property as well as an estimated value on what the property would be worth once all the upgrades listed in the quotes are complete.

If the insurer as well as lender approve the quotes and the appraisal estimation, you will be conditionally approved for the additional money and you will generally have 120 days from closing to perform them. Once everything is done, an inspection will be ordered to confirm the upgrades have been completed and to also confirm the new market value with all upgrades. Once everything is confirmed the lender will distribute the additional funds requested on top of your initial mortgage.

This purchase plus option is fantastic, however, it must be understood it is not a loan prior to work being started, it is a reimbursement that will be distributed and added onto the balance owing on your mortgage once the work is complete. That means you will need to find other resources to get everything ordered, installed, and completed.

If you are considering a property in which you wish to complete upgrades to as soon as you move in, the purchase plus option is a fantastic one! Please feel free to contact me with any questions relating to this or any other mortgage topic!

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