A purchase plus improvements mortgage allows home buyers to finance certain renovations as part of their home purchase. In Ontario, this option can help buyers improve a property shortly after purchase without needing separate financing.
This page explains how purchase plus improvements mortgages work, when they are used, and what buyers should consider before choosing this option
What Is a Purchase Plus Improvements Mortgage?
A purchase plus improvements mortgage allows buyers to include eligible renovation costs in their mortgage when purchasing a home. Instead of borrowing additional funds later, approved improvements are financed as part of the initial mortgage.
The mortgage is usually funded in stages. The purchase portion is advanced at closing, while renovation funds are released after the work is completed and verified.
How Purchase Plus Improvements Mortgages Work
At the time of purchase, buyers submit renovation plans and cost estimates for lender review. Once approved, the mortgage amount includes both the purchase price and eligible improvement costs.
After the home purchase is completed, renovations are carried out within a specified timeframe. Funds for improvements are released once the lender confirms the work has been completed as planned.
Common Types of Improvements That May Qualify
Eligible improvements vary by lender, but often include renovations that add value or improve habitability.
* Structural or Safety Improvements
This may include roof repairs, foundation work, or upgrades required to meet safety standards.
* Kitchen, Bathroom, or Interior Updates
Renovations such as kitchens, bathrooms, flooring, or energy-efficient upgrades are commonly considered.
* Cosmetic vs Value-Adding Renovations
Purely cosmetic changes may be limited, while improvements that increase long-term value are more likely to qualify.
Who Uses Purchase Plus Improvements Mortgages?
This type of mortgage is often used by buyers purchasing older homes or properties that need updates before they are fully functional or comfortable.
Homeowners in Ontario, including Vaughan, Markham, Richmond Hill, and Newmarket, may use purchase plus improvements mortgages to enter desirable neighborhoods where move-in-ready homes are less available.
Purchase Plus Improvements vs Refinancing
Purchase plus improvements mortgages are arranged at the time of purchase. Refinancing occurs after ownership and involves changing the mortgage structure to access equity.
Using a purchase plus improvements mortgage can reduce the need for refinancing later, but eligibility and planning are essential to avoid delays or unexpected costs.
How Mortgage Renewal Relates to Purchase Plus Improvements
Once renovations are completed, the mortgage continues under its existing term until renewal. At renewal, homeowners can review rates, terms, and mortgage structure like any other mortgage.
This page works alongside the main mortgage renewal guide, which explains how renewal decisions affect long-term affordability and flexibility.
Interest Rates and Renovation Financing
Interest rates influence the overall cost of financing renovations through a mortgage. Rates are affected by broader economic conditions and policy decisions made by the Bank of Canada.
Understanding how rates impact borrowing helps buyers evaluate whether including renovations in the mortgage aligns with their financial plans.
Reliable Information for Buyers Planning Renovations
Educational resources from the Canada Mortgage and Housing Corporation explain renovation considerations and housing affordability. Consumer guidance from the Government of Canada outlines mortgage rules and borrower responsibilities.
Using reliable information alongside professional advice supports better planning and smoother transactions.
If you are considering renovations when buying a home, speaking with an SMM Mortgage advisor can help determine whether a purchase plus improvements mortgage fits your plans.
Frequently Asked Questions
- What is a purchase plus improvements mortgage?
It is a mortgage that includes approved renovation costs as part of the home purchase. - When are renovation funds released?
Funds are typically released after renovations are completed and verified. - Do all renovations qualify?
No. Eligibility depends on lender guidelines and the type of improvement. - Is purchase plus improvements the same as refinancing?
No. This mortgage is arranged at purchase, while refinancing happens after ownership. - Does this mortgage affect renewal later?
No. The mortgage renews like any standard mortgage once the term ends.
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