Welcome to the ultimate guide to Purchase + Improvement mortgages. Find all the essential information you need right here.
Welcome to a smarter way to buy your next home.
A Purchase Plus Improvements mortgage lets Canadian homebuyers roll the cost of eligible renovations right into their mortgage, making it easier to transform a property into the home they truly want. Whether you’re updating a kitchen, modernizing a bathroom, or tackling essential repairs, this program helps you access the funds upfront—so you can buy with confidence and improve with ease
Key Points:
Understanding what will be required of you: know what documentation you will need to provide your lender and timeframes for project completion
Down Payment: learn about how to calculate the required down payment when you are financing both the purchase and the cost of improvements
Navigating Renovation Process: Get insights on property inspections and making offers and conditions of financing.
“Buying a home is not just a financial investment, it’s a place to create memories.”
How Much
Can You Afford?
Affordability for a Purchase Plus Improvements mortgage is assessed the same way as any other mortgage: by reviewing your debt ratios. Lenders look at the percentage of your gross income that goes toward shelter costs – your mortgage payment, property taxes, and heating costs – as well as your total debt obligations, which include loans, credit cards, child support, and alimony. For insured mortgages, shelter costs can represent up to 39% of your gross income, while total debt payments can represent up to 44%.
With Purchase Plus Improvements, the key difference is that your as‑improved value – the purchase price plus the approved renovation costs – is used to determine your mortgage amount and down payment. Because of this, renovation costs must be considered when making an offer. Your purchase price plus your planned improvements must fit comfortably within your qualifying ratios and your maximum approved mortgage amount.
Down Payment
How much will be required for a Down Payment?
With a Purchase Plus Improvements mortgage, your minimum down payment is calculated on the as‑improved value of the home; the purchase price plus the approved renovation costs, which lenders and insurers typically treat as a dollar‑for‑dollar increase in value.
Because the improvement amount is added directly to the value for qualification purposes, your down payment is based on the total project cost, not just the purchase price. This allows you to finance upgrades like kitchens, bathrooms, flooring, or essential repairs right into your mortgage, giving you the flexibility to transform a property while keeping your upfront costs predictable and manageable.
In Canada, the minimum down payment required depends on the purchase price of the home
- For homes up to $500,000, the minimum down payment is 5% of the as‑improved value.
- For homes between $500,000 and $1.499,999, the minimum down payment is 5% on the first $500,000, plus 10% on the remaining as‑improved amount.
- For homes at $1.5 million or more, the minimum down payment is 20%, as these properties fall outside insured mortgage limits.
What is Default
Insurance?
With a Purchase Plus Improvements mortgage, your financing can be either insured or uninsurable, depending on the property price and your down payment.
An insured Purchase Plus Improvements mortgage is one where the as‑improved value is under $1.5 million and the down payment is less than 20%. In these cases, the mortgage is backed by default insurance, which protects the lender if the borrower is unable to make payments. This insurance allows lenders to offer lower interest rates and more flexible qualification options.
For homes priced at $1.5 million or more, or for buyers choosing to put 20% down or higher, the mortgage becomes uninsurable, meaning default insurance cannot be applied. Both insured and uninsurable options can include renovation costs through the Purchase Plus Improvements program—the difference lies in how the mortgage is structured and priced.
Who needs default insurance??
Mortgage default insurance is required for any borrower with less than a 20% down payment.
How is the insurance paid for?
The cost of the insurance is added to your mortgage balance. Only the HST on the default insurance fee must be paid out-of-pocket at closing.
Associated Costs
Costs:
Appraisal requirements: depending on the scope of your renovations the lender may require an appraisal inspection confirming completion of the work.
Higher legal fees: Legal costs may be higher than with a traditional mortgage because your lawyer must hold the improvement funds in trust during the renovation period and collect the required documentation to confirm the work is complete before releasing those funds.
How the Purchase Plus Improvements Process Differs
A Purchase Plus Improvements mortgage follows the same basic structure as a traditional mortgage, but with a few added steps to make sure your renovation plans are properly reviewed and approved. Because your mortgage amount and down payment are based on the as‑improved value—the purchase price plus the lender‑approved renovation costs—you’ll need to factor in the cost of improvements early and ensure they fit within your pre‑approved maximum
Key Steps
Pre-Approval: Start with a standard pre‑approval, confirming your maximum qualifying amount based on income, credit, and debt ratios.
Estimate Costs: Estimate potential renovation needs early, so you have a sense of what improvements you may want to include in your mortgage.
COF: Include a longer financing condition in your offer to give yourself enough time to gather detailed contractor quotes (refer to COF guide for more information).
Get Quotes: Obtain written contractor quotes outlining the scope and cost of the improvements you want to finance.
Submit Application: Submit the quotes to your Broker to be provided to the lender with your mortgage application.
Satisfy Conditions: satisfy the conditions of your mortgage approval by providing any required documentation to the lender (this may involve getting an appraisal).
Close Mortgage: you will gain access to the home on closing day and may begin your renovations at this time. Keep in mind, your lawyer holds the improvement funds in trust and releases them only after the renovations are completed and proper documentation is provided.
Complete Renos: Complete the approved renovations, then submit invoices, receipts, or inspection reports so the lender can authorize the release of funds.
Frequently Asked Questions
What are the limits to the renos you can do?
- most lenders allow you to borrow a maximum of 20% of the purchase price for renovations
- renovations should be for cosmetic upgrades rather than structural changes to the property
- common uses include flooring, kitchens, bathrooms, roofing, windows, or essential repairs
- for most lenders, money for renovations is not released until the project is 100% complete so you will need to retain some of your own funds to pay deposits to contractors, if those are required
- large renovations increase the likelihood that you will require a substantial deposit
- Cosmetic items like furniture or décor are not eligible.
What if the renos come in under budget?
If the renovation costs end up being lower than the original contractor quote, your lawyer will only release the amount actually spent on the project. Any unused improvement funds are returned directly to your lender and applied as a lump‑sum payment toward your mortgage principal. Your regular mortgage payments will remain the same, even though your principal has been reduced.
Can I change the renovation plan after approval?
Changes may require lender review and approval. Significant changes could affect the as‑improved value or the amount of funds released.
How long do I have to complete the renovations?
Most lenders require the work to be completed within 90 to 120 days after closing, though timelines can vary.
Bringing Your Vision Home
In the end, Purchase Plus Improvements is about giving you the freedom to shape your new home into a space that truly fits your life. By planning ahead, gathering clear quotes, and understanding how the program works, you can move forward with confidence—knowing your upgrades are financed efficiently and built right into your mortgage from day one. If you ever need guidance, clarity, or a second set of eyes on your plan, I’m here to make the process feel simple, transparent, and fully supported.
Download your ODF copy here!
