Mark – What is the purchase plus program?
Gert – Purchase plus improvements can help qualified home buyers make their new home just right for them with tailored improvements immediately after taking possession, all of this can be done with one manageable mortgage payment, with only 5% down.
Mark – what are some of those things that people are buying using the purchase plus [improvements] program?
Gert – basement finishing, sometimes putting a suite into the basement, renovating a kitchen, updating their kitchen, new flooring, new roof, new furnace…
Mark – this is stuff specifically to do with the house sounds like, we talked about this before, bet there’s another way of handling stuff like a garage, a fence, [the purchase plus improvements program] is not for landscaping. It’s not for landscaping?
Gert – no, lenders don’t want to include landscaping in purchase plus improvements. Landscaping, fencing, appliances, hot tubs, they types of things, they don’t want to have any chattels.
Mark – What are some of the limitations?
Gert – the main thing is the chattels. Lenders want to get quotes for the items you want to improve in the house, the maximum percentage is 20% of the purchase price, or $40,000.
Mark – if I want to build my kids a playhouse, on top of my house, it’s going to be about $20,000, very rare, it probably won’t add value to the property, are they going to say yes to that?
Gert – likely not, we need quotes for everything upfront, for all the work that’s going to need to be done, and lender want you to do that work. If you’ve had a quote to do your kitchen, they don’t want you to build a garage, you need to stick with the plan, and stick with the quotes you’ve provided to the lender and that they’ve approved.
Mark – So what if I’m a handyman? Am I able to do it myself then?
Gert – They will not pay you for sweat equity, lenders don’t do that, but they pay for all the materials used, so you have to get up front quotes for material, do the work yourself. The key thing about that though, is that you do need to have the money up front to cover the cost, to buy the material, and then once you’re done an inspection, [by the bank] or you provide receipts to the lender (lenders have different guide lines in regards to that) but once it is complete, the lender will reimburse you for that money that you’ve spend on material.
Mark – Sometimes people have a different idea as far as how they’re going to tackle that renovation, or [how] they’re going to add in that new furnace or do new flooring. They think they will just take their mortgage and do [the renovation] themselves over time, and I bet that works sometimes, but it might not be the most optimal way in most cases??
Gert – Only if you have cash upfront would I suggest that. If you have the money to pay for it, then that’s great, but if you don’t, plan to do with the the purchase plus improvements program, because that guarantees that, even if you put it on credit cards or lines of credit up front, you will have that money to pay off those lines of credit and credit cards. You can’t consolidate debt if you’re going in with a purchase with under 20% equity, so sometimes I have clients that will come to me a year or two after buying, and they’ve done all the Reno’s, they’ve put it on credit cards and they put it on lines of credit, and now they realize they’d actually like to have it in with their mortgage, so at that time, refinancing isn’t an option, because you have to have 20% equity.
It’s always good to just plan it right up front, it might take a little more time when you are looking at the house, to have a contractor come in to quote the job you want to do or get quotes for the material, but it’s well worth it – to do it up front, to do the purchase plus improvements, and it will work our really well for you at the end.
Mark – Will all the lenders do this?
Gert – The majority of the lenders do it, there’s a couple of our lenders that don’t, but the majority of our lenders offer it.