Buying a Fixer-Upper in Ontario? How a Purchase Plus Improvements Mortgage Works
Some homes have perfect bones and terrible finishes. Others have the right location, the right layout, and just enough problems to scare most buyers away.
That can create opportunity.
If you have found a home with potential but it needs work, a Purchase Plus Improvements mortgage may help you buy it and finance eligible renovations at the same time.
For the right buyer, it can be a really smart way to turn an almost-right property into the right one.
What Is a Purchase Plus Improvements Mortgage?
A Purchase Plus Improvements mortgage allows you to roll eligible renovation costs into your mortgage when you buy the home.
Instead of buying the property first and then trying to find separate renovation financing later, this structure lets you plan both pieces together from the beginning.
What Kind of Renovations Are Usually Eligible?
Eligible improvements often include things like:
- Flooring
- Kitchens
- Bathrooms
- Painting
- Windows and doors
- Roofing
- Insulation
- Other value-adding repairs or updates
Luxury upgrades, highly personal upgrades, or improvements that do not clearly support property value may not be approved the same way.
How It Usually Works
- You find the property and identify the renovations needed
- You get contractor quotes for the proposed work
- The mortgage is approved based on the purchase plus approved improvements
- The renovation funds are held back until the work is completed
- You complete the renovations within the required timeline
- The lender releases the holdback funds once the work is verified
This is the part many buyers do not realize: you usually do not get the renovation funds handed to you upfront on day one. There is typically a holdback process.
Why Buyers Like This Option
- You can buy a home with potential instead of waiting for something fully updated
- You may be able to improve value quickly
- You keep the financing strategy more organized
- You may avoid needing a separate higher-cost renovation loan
What to Watch Out For
1. You need real quotes
Lenders want to see detailed contractor quotes, not rough guesses.
2. Timelines matter
Renovations usually need to be completed within a specific time window after closing.
3. Cash flow still matters
Because of holdbacks, you may need cash available to start or pay for the work before reimbursement happens.
4. Not every home fits
If the property needs major structural work or is not currently livable, a Purchase Plus Improvements mortgage may not be the right solution.
Who This Can Be Great For
- Buyers open to cosmetic updates
- First-time buyers trying to get into a better neighbourhood
- Families who would rather renovate than overpay for someone else’s finishes
- Buyers who see potential where others see inconvenience
Glossary
| Term | Meaning |
|---|---|
| Purchase Plus Improvements Mortgage | A mortgage that includes both the home purchase and approved renovation costs. |
| Holdback | Funds the lender keeps back until renovation work is completed and verified. |
| Contractor Quote | A written estimate showing the cost and scope of renovation work. |
| As-Improved Value | The estimated value of the property after the planned renovations are complete. |
| Eligible Improvements | Renovations that meet lender and insurer guidelines for inclusion in the mortgage. |
Frequently Asked Questions
Can I use this program for a full gut job?
Usually not in a standard form. If the work is too extensive, a different financing structure may be needed.
Do I get the renovation money right away?
Usually no. In most cases, the funds are held back and released after the work is completed and confirmed.
Can I do the work myself?
Sometimes minor work may be possible depending on the lender, but many lenders prefer licensed contractor quotes and completion proof.
Is this only for first-time buyers?
No. It can help many types of buyers, depending on the property and the lender guidelines.
Thinking About Buying a Home With Potential?
If you are considering a fixer-upper and want to know whether a Purchase Plus Improvements mortgage could work for you, I would be happy to help you look at the numbers and the structure before you make an offer.
Deepak Bansal - Mortgage Broker, Ontario
Phone: 416-347-9292
Email: info@mortgagesbydeepak.ca
Website: www.mortgagesbydeepak.ca
