Buy the Right Home — Then Make It Yours
Not every home is move-in ready—and that’s not necessarily a bad thing.
A Purchase Plus Improvements mortgage allows you to buy a home and finance renovations at the same time, using one mortgage, one rate, and one payment.
At Lotus Loans & Mortgages, this is one of the most underutilized strategies we recommend—especially in competitive markets where updated homes come at a premium.
What Is a Purchase Plus Improvements Mortgage?
This program allows you to:
- Purchase a property
• Add renovation costs to your mortgage
• Finance everything at mortgage rates
Instead of paying for renovations separately (often at higher interest rates), the cost is rolled into your mortgage upfront.
Simple example:
- Purchase price: $600,000
• Renovations: $40,000
• Total mortgage: $640,000 (subject to approval)
You still only have one payment and one interest rate.
Why This Strategy Makes Sense
Most buyers fall into one of two traps:
- Overpaying for a fully renovated home
- Buying a cheaper home and struggling to fund renovations later
This program solves both.
Key advantages:
- Lower interest rates vs personal loans or credit cards
• Ability to customize the home immediately
• Access to properties others overlook
• Increased property value after renovations
Mortgage rates are significantly lower than unsecured borrowing, making this one of the most cost-effective ways to renovate.
How It Works (Step-by-Step)
The process is straightforward, but requires planning:
- Get pre-approved for the total amount (purchase + renovations)
- Obtain quotes from licensed contractors
- Submit quotes with your mortgage application
- Lender orders an appraisal based on the “as-improved” value
- Close on the home (renovation funds are held back)
- Complete renovations within the required timeframe
- Funds are released once the work is verified
The key difference is that your mortgage is approved based on the future value of the home, not just its current condition.
How Much Can You Borrow for Renovations?
This depends on the lender and insurer, but generally:
- Renovations are typically capped at 10%–20% of the property’s value
• Insured mortgages can allow as little as 5% down payment
• The loan is based on the “as-improved” value of the property
This means the improvements must make sense and add value to the home.
What Types of Renovations Are Allowed?
Generally, renovations must improve the value and livability of the property.
Common eligible improvements:
- Kitchens and bathrooms
• Flooring, painting, fixtures
• Roof, windows, and doors
• Basement finishing
• HVAC and mechanical upgrades
• Accessibility modifications
Typically not allowed:
- Luxury additions (e.g., pools, hot tubs)
• Non-permanent upgrades
• Cosmetic items without measurable value impact
Important Rules to Know
This program comes with a few key conditions:
- Renovation funds are held back at closing
• You may need to front initial deposits to contractors
• Work must usually be completed within 90–120 days
• Lender or insurer may require inspection before releasing funds
• Contractors typically must be licensed and insured
This is why proper planning upfront is critical.
Purchase Plus Improvements vs Other Options
Before recommending this strategy, we always compare alternatives:
Purchase Plus Improvements
• Best for buying a home that needs work
• Lowest borrowing cost
• Requires planning before closing
HELOC or Refinancing
• Best for existing homeowners
• More flexible timing
• Requires sufficient equity
Personal Loans or Credit Cards
• Quick access
• Much higher interest rates
In most cases, if you know you want to renovate at the time of purchase, this program is the most efficient solution.
When We Recommend This Strategy
At Lotus Loans & Mortgages, we typically suggest this approach when:
- The property is priced well but needs updating
• You want to customize the home to your taste
• Renovations will increase property value
• You do not want to use high-interest debt after closing
When It May Not Be the Right Fit
This program is not ideal if:
- You want to renovate long after purchase
• You prefer DIY work (some lenders restrict this)
• Renovations are too extensive or structural
• You are not comfortable managing timelines and contractors
In these cases, a refinance or HELOC strategy may be more appropriate.
Our Approach at Lotus Loans & Mortgages
We do more than just arrange the mortgage.
We help you:
- Structure the total financing correctly
• Review renovation plans for lender approval
• Coordinate timing with lenders, appraisers, and lawyers
• Identify risks before you commit
Most importantly, we make sure the numbers make sense—not just today, but long term.
Next Steps
If you are considering buying a home that needs work:
Reach out to Lotus Loans & Mortgages.
We will walk you through whether a Purchase Plus Improvements mortgage is the right fit—and structure it properly from day one.
Disclaimer
Mortgage guidelines, lender policies, interest rates, and legal processes in Ontario are subject to change without notice and may vary based on individual borrower circumstances. The information provided above is for general educational purposes only and should not be considered financial, legal, or mortgage advice. All mortgage applications are subject to lender approval, qualification, and current guidelines at the time of submission. We recommend speaking directly with a mortgage professional to review your specific situation and confirm the most up-to-date options available.
