Purchase Plus Improvements: Finance Renovations Into the Mortgage to Win More Listings
When buyers fall in love with a home but hate the kitchen or bathroom, most realtors lose the deal. The Purchase Plus Improvements mortgage lets clients finance renovations directly into their mortgage — and it's one of…
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Show notes
When buyers fall in love with a home but hate the kitchen or bathroom, most realtors lose the deal. The Purchase Plus Improvements mortgage lets clients finance renovations directly into their mortgage — and it's one of the most overlooked tools to close deals on fixer-uppers and win more listings.
Scott breaks down the funding options, from lump-sum payouts to progress draws where funds release after one-third, two-thirds, and full completion of work—ensuring accountability while minimizing risk. He notes key lender variations, like caps at $40,000 for some versus unlimited amounts tied to appraisals for others, urging brokers to shop wisely for the best fit. This strategy shines for first-time buyers eyeing affordable homes needing TLC, investors targeting rentals, and sellers prepping properties for quicker sales. Even refinance plus improvements can unlock equity for essential fixes, valuing the home as-improved to bridge gaps in current equity.
With rising interest in home renovation financing in Canada, Scott emphasizes its versatility across residential, select rental, and rare commercial scenarios. By blending practical tips with real-world examples—like transforming ugly properties into lender-approved gems—this episode equips mortgage professionals to close more deals efficiently. Discover how purchase plus improvements mortgages expand buying options, reduce out-of-pocket costs, and build wealth through smarter property upgrades.
Key Takeaways
- Purchase Plus Improvements Basics: Roll renovation costs into your mortgage for buying fixer-uppers, with lenders funding based on post-improvement appraisals to finance even distressed properties.
- Funding Flexibility: Choose lump-sum advances or progress draws (payouts at 1/3, 2/3, and 100% completion) to ensure work progresses, making it ideal for kitchens, bathrooms, paint, or major repairs.
- Lender Variations to Watch: Many cap funds at $40,000, but others offer unlimited amounts if the renovated value appraises—shop insured options for 5% down payments and higher loan-to-value ratios.
- Refinance Plus Improvements Power: Unlock equity for pre-sale fixes by valuing the home as-improved, helping sellers boost marketability and close deals faster without upfront cash.
- Versatile Applications: Works for residential purchases, select rentals (despite common lender hesitancy), and rarely commercial—perfect for first-time buyers, investors, and wealth-building strategies.
- Pro Tips for Success: Get detailed quotes upfront, guide clients on realistic scopes, and use this tool to turn "ugly" homes into livable assets, emphasizing informed decisions over impulse buys.
Links to Show References
- LendCity Mortgages (for Pre-Approvals and Renovation Financing): lendcity.ca
- (00:00) - Intro to Purchase Plus Improvements Mortgage
- (01:00) - Why It's an Underrated Renovation Financing Tool
- (01:30) - How Purchase Plus Improvements Works for Homebuyers
- (02:15) - Funding Options: Lump Sum vs. Progress Draws
- (02:30) - Refinance Plus Improvements for Sellers and Equity Boosts
- (02:55) - Applicability to Rentals, Commercial, and Pro Tips
Realtor questions from this episode
How does a purchase plus improvements mortgage work?
Scott says that when the client makes a purchase, a quote for the renovation costs is obtained and the lender builds it into the approval. The lender funds in stages or as a lump sum, and the client has to do the work and then receives the renovation money.
How is the renovation money paid out?
As a lump sum or as progress draws. Scott describes draws as a payout when one third of the work is done, another at two thirds and the final payout at completion, depending on the lender and the size of the work.
Are all lenders the same on renovation limits?
No. Scott says most lenders will only give $40,000 of renovation money on purchase plus improvements, while others will give an unlimited amount as long as the property appraises, so realtors should be careful. He adds that it can also be done as a refinance, and on some rental properties where many lenders will not.
Transcript
Transcript of the episode as recorded. Rates, fees and program details are as stated on the recording date and may have changed.
Welcome back to the Close More Deals podcast.
Welcome back to the Close More Deals podcast. I'm your host, Scott Dillingham. Today, I'm gonna be talking to you about purchase plus improvements. We can also do refinance plus improvements. This is an underrated tool and resource that the lenders have to maximize your client's property's value and condition to make it easier to sell. So there's a couple of things. Most lenders are used to the property values being much lower than what they are now. So most lenders across the board will only give you $40,000 of renovation money for purchase plus improvements, where others will give you an unlimited amount as long as the property appraises.
So be careful of that when you're working with this program with your borrowers. Now how this program works if you haven't done it, when you're making a purchase, we get a quote for the renovation expenses. The lender will build it all into the approval, and what they do is they fund in stages or in lump sum depending on how it's set up. But ultimately, the client has to do the work in the property, and then they get the renovation money, and they're good to go.
Now, the benefit of this is they can turn any property that maybe it's ugly, maybe they don't like the kitchen or bathroom or the paint or whatever, and allows you to still have them potentially move forward with the property as long as they know about the plus improvements. Now we've done this on properties that are heavily distressed that a lender wouldn't normally lend on as well. We did the purchase plus improvements, and then they were able to move forward because they saw that the work was gonna be done and it would be livable condition and they were happy with that.
So keep that in mind. So there's a lump sum, like I mentioned, and there's also the progress draw. So progress draw is when one third of the work is done, you get a payout. When two thirds is done, you get a payout. And when the final amount of work is done, you get the final payout. Depending on the size of the construction, some lenders might want to do that. We can also do it when we do a refinance. So if somebody is trying to refinance their home and say maybe they don't have all the equity needed, but there's some massive things that they have to fix on the property before it sells, we can do the refinance plus improvements where they'll value the property based on what it will be when the work is done, and they'll lend based on that.
So it's all as long as it's all within guidelines, they'll move forward…
So it's all as long as it's all within guidelines, they'll move forward and do it. So then on your end, it makes it easy to sell the property, which is what you want. So super cool stuff. Lots of good programs. This happens. We can do this program on residential. Some commercial, we can do it, but it's very, very rare. And also rental properties as well. I wanna highlight that because a lot of lenders, they won't touch it on rentals, but we've got those that do too.
So lots of options. Updated rates and everything will be in the show notes as well as additional details and resources for you. Looking forward to connecting, and I hope you have a great week.