Canada’s real estate market rewards buyers who can see potential. The home that needs a new kitchen, has dated bathrooms, or could use a basement suite built out is often priced below comparable move-in-ready properties in the same neighbourhood. For buyers who are willing to do the work, those properties represent real opportunity.
The problem has traditionally been a cash flow one. You’ve put your savings toward a down payment. Closing costs have been accounted for. And now the property you’ve purchased needs $40,000 in renovations before it feels like home. Where does that money come from?
For a lot of buyers, the answer has been credit cards, lines of credit, or asking family for help. A Purchase Plus Improvements mortgage is a cleaner solution, and it’s one that most buyers don’t know exists until they’re already in the middle of a deal.
What a Purchase Plus Improvements Mortgage Is
A Purchase Plus Improvements mortgage rolls the cost of planned renovations directly into your mortgage at the time of purchase. Instead of financing the purchase price alone, the mortgage is based on the purchase price plus the estimated cost of the improvements you plan to make.
The mortgage amount is calculated using the value of the property after the improvements are completed, not the as-is purchase price. This matters because it means you’re borrowing against what the home will be worth once the work is done, which is typically more than what you paid for it.
The practical result is that renovation costs get spread across your mortgage at your mortgage interest rate, rather than sitting on a line of credit at a higher rate or going onto a credit card.
Over the life of a mortgage, the difference in interest cost between those two approaches is significant.
What It Can Be Used For
Purchase Plus Improvements works for renovations that are permanent and add value to the property. Common uses include:
➡️ Kitchen and bathroom updates
➡️ Flooring, windows, and mechanical upgrades
➡️ Adding or finishing a basement
➡️ Building a legal secondary suite (which also opens the door to rental income – see my post on rental suites for more on that)
➡️ Roofing, insulation, and other structural improvements
It is not designed for furniture, appliances that aren’t built-in, or cosmetic items that don’t add to the property’s appraised value. The improvements need to be permanent and assessable by an appraiser.
How the Process Works
The mechanics of a Purchase Plus Improvements mortgage are straightforward once you understand the sequence. Here’s what to expect:
Before your offer is firm, you need contractor quotes for the planned work. This is the step that requires the most coordination during the condition period. You need access to the property to get your contractor or trades in to assess the work and provide written estimates. Those quotes become part of the mortgage application, so getting them done quickly during the condition period is critical. This is not something you can sort out after the fact.
The appraisal has two values. The appraiser assesses the property at its current as-is value and then provides an estimated value once the improvements are completed. The mortgage amount is based on that improved value, which is why having accurate, detailed quotes matters. Vague estimates lead to vague appraisals.
The renovation funds are held back. When your mortgage funds at closing, the renovation portion is not released to you immediately. Your lender instructs your solicitor to hold those funds until the work is completed and inspected. You take possession of the home and then complete the renovations within the required timeframe, which is typically 90 to 120 days from your possession date.
You fund the work first. The renovation funds are released after the work is done and verified, not before. That means you need a way to pay for the renovations upfront and then get reimbursed when the lender releases the funds. Options include using savings temporarily, paying by credit card and clearing it when the funds come through, or finding a contractor willing to wait for payment until completion. Planning for this cash flow gap is part of preparing for a Purchase Plus Improvements purchase properly.
Why This Approach Makes Strategic Sense
We talk a lot about beginning with the end in mind when it comes to real estate, and Purchase Plus Improvements is one of the clearest examples of that principle in action.
A property that needs work is often priced at a discount relative to its renovated neighbours. When you buy it and complete the improvements, you’ve created equity. The appraised value post-renovation is higher than what you paid, and you’ve financed the renovations at mortgage rates rather than credit card rates. That’s a meaningful financial advantage built right into the purchase.
For first-time buyers trying to get into a market where move-in-ready properties at their budget are limited, this program opens up a broader set of options. A property that others overlook because it needs work becomes an opportunity rather than a problem.
For buyers thinking about the rental income potential of a basement suite, combining a Purchase Plus Improvements mortgage with a suite build means the suite is generating income from the start, rather than being a project you fund out of pocket years later.
What to Watch Out For – A few practical realities worth knowing before you go down this path:
Contractor timing is everything. You need quotes during the condition period, which is often a tight window. If your conditions are being waived in five days, you need a contractor ready to walk the property on short notice. This is not the time to be calling around for the first time. Have your trades lined up before you start writing offers on properties that need work.
The quotes need to be real. Lenders and appraisers are experienced at identifying estimates that don’t reflect actual costs. Padding the renovation budget to access more mortgage funds doesn’t work. The appraisal will reflect what the improvements are genuinely worth. And your post renovation appraisal needs to match the original quote. The scope of work cannot change.
The timeline is firm. Renovations need to be completed within the lender’s specified window, typically 90 to 120 days from possession. If the work runs over time, there are complications. Plan realistically and build a buffer.
Not all lenders offer this product. As with everything in the mortgage world, lenders have different policies, different improvement limits, and different requirements for how the program works. Knowing which lenders are the right fit for your file is part of what I bring to the process.
The Conversation Worth Having Early
The most successful Purchase Plus Improvements purchases happen when the mortgage strategy is part of the conversation before the offer goes in, not after. If you’re actively searching and you’re open to properties that need some work, let’s talk about how to set you up to move quickly when the right one comes along.
That means having your contractor relationships in place, understanding how the holdback process works, and knowing in advance how you’ll bridge the funding gap while the renovation is underway.
Book a Discovery Call and let’s build the plan before you need ii!
Cheryl Sanguinetti is a Calgary-based Mortgage Broker and the founder of Cheryl Sanguinetti Mortgages. She specializes in helping homeowners, investors, and self-employed Canadians build mortgage strategies that support long-term financial goals.