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Making Use of the CMHC Improvements Mortgage

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Consider this scenario:
After months of fruitless searching on Centris and Duproprio, you’ve finally found a dream home that aligns with your criteria and budget: a charming 2 bedroom Victorian townhouse in Pointe St Charles with a garage for the affordable price of $250,000! You instantly fall in love with the art deco staircase and the peaceful solarium overlooking a quiet, tree-lined street. You set your heart on this home and start dreaming of how you’ll furnish it once it’s yours. However, on the day of the inspection, you’re in for a shock. It turns out there’s mould under the hardwood floor due to a leak in the piping. No wonder the home was being sold so cheap. You’re looking at a 25K minimum of renovation work including repainting and redoing part of the floor. The home was a deal to begin with, but is it still worth it? How do you go about financing the renovation without taking out a separate line of credit with the expensive interest that loans generally carry? 

Luckily, there’s a little known program offered by the CMHC that addresses this very problem. The CMHC Improvements program (formerly known as the Purchase Plus Improvements Plan) gives qualified buyers the opportunity to borrow up to 10 per cent of the as-improved value of a home to put towards the cost of renovations and include it in their mortgage loan amount. In this particular instance, you know that the home would have a market value of $300,000 once it’s been fixed up. So you’d be able to tack on an additional $30,000 to your mortgage to help out with the renovation work. It’s an ideal option for first time homebuyers who can’t afford to tie up both the downpayment amount and the costs of renovations after their purchase.

How would you go about applying for it? 

To begin, borrowers must ask their contractors or inspectors for a quote breaking down the scope of work and the costs associated to it, before closing on the house. Submit this quote to your mortgage lender, and then to the CMHC for approval. Once they’ve both approved the amount, it’s added to your mortgage loan.

Once the deal is closed, the improvement amount is advanced to your notary, who will hold onto it until the renovations are complete. Once the work is complete, the lender will authorize your notary to release the improvement amount to you.

What isn’t included in the program? 

Borrowers cannot use the Improvements loan to fix broken appliances as these are not considered to be part of the physical structure of the home. Additionally, the loan must only be used to execute necessary renovations such as structural damages, mould, hidden defects and so on. You can’t use the advance to pay for strictly cosmetic improvements like repainting the walls a different shade. Nor can you use it for ‘unnecessary’ work like building a fireplace, or converting the basement into another unit.


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