Monday, January 24, 2022 08:09

Purchase Plus Improvements

You’ve found the house that you like but it needs to be renovated. You can, of course, use your credit cards or cash-in some of your investments to pay for the renovations. Another option is to take advantage of CMHC’s or Genworth’s Purchase + Improvement (P+I) program. The program allows you to add on the renovation cost to the purchase price, so you benefit from the low mortgage interest rate and make only one payment.
Say, for example, the house is priced at $200,000 but it needs another $10,000 in renovations. You can add on the renovations to the purchase price and CMHC or Genworth will lend against the total value (purchase price plus the renovation cost).

Purchase price $200,000
Renovations $10,000
Total cost $210,000
Lending value $210,000
Max. Mortgage $199,500 (95% of $210,000)
Min. down payment $10,500


With CMHC, if the improvements exceed 10% of the purchase price or $10,000, CMHC charges are surcharge of ½% on the mortgage amount. You will want to avoid this since this.
Genworth does not have a surcharge. The amount of the improvement can be as much as you qualify for. For amounts over 10% of the purchase price or $20,000, Genworth will require documentation from the lender showing that the renovations have been completed. Furthermore, up to 2 advances are allowed.
Should you decide to apply under either CMHC or Genworth’s P + I program, you will need to think about timing issues. Before your broker can submit the transaction to the lending institution, you will need to supply him with quote and/or a renovation contract. Since, in today’s market, subject removal days are short, you will need to have the quotes/contract available a few days before subject removal date to give the lender some time to process the transaction.