Transform that Dated Home into Your Dream Home: A Buyers Guide to Home Buying

So, you’ve found “that” home. You know the one – the charming yet slightly outdated gem with a kitchen straight out of the ’70s, pink bathroom fixtures that scream retro, and shag carpet that could use a serious update. At first glance, you might be tempted to run for the hills, but hold on a second! What if I told you that with a little creativity, a dash of humor, and a Purchase Plus Improvement Loan (PPI Loan), you could turn “that” home into your dream oasis? Yes, really!

Let’s face it – there’s something oddly charming about a home stuck in a time warp. Sure, the avocado-green appliances and floral wallpaper might not be everyone’s cup of tea, but instead of seeing them as drawbacks, why not embrace the retro vibes? With a PPI loan, you can transform outdated spaces into modern marvels while preserving a hint of nostalgia.

And those infamous pink bathroom fixtures – a relic of a bygone era. While some may see them as an eyesore, others recognize the potential for a stylish and unique space. Y you can bid farewell to the pink tiles and say hello to a spa-like oasis that’s as chic as it is inviting. Picture crisp white subway tiles, sleek fixtures, and luxurious accents.

A PPI loan can also help to “build” a basement suite for those who need a mortgage helper.  In some cases, we can use the proposed income from this “new” suite to make the mortgage more affordable; thus helping “would-be buyers” to qualify.  We all understand that with higher interest rates, affordability is a big concern.  And for some, making it difficult to enter the market. This creative solution may be the difference between buying a condo or a home.

So, how do you make this loan your secret weapon to transforming that dull, outdated ‘70s box-style home into your DREAM HOME?

This innovative financing option allows you to roll the cost of renovations into your mortgage, giving you the flexibility to customize your space without draining your savings. With one loan, you can purchase the home and fund the renovations, while enjoying the benefits of homeownership. There are limitations:

1. Quotes are required to confirm the type of work.
2. The buyer must do the work before funds are released.
3. An Inspection before to support the “new” market value.
4. An Inspection after to confirm work’s complete.

#1. Every Lender/Insurer will require quotes upfront.  Not only do the quotes confirm the type of work that is being done but they also confirm the value of the work.  Why is this so important you may ask? It is simple! The Lender will add the total cost of the work to be performed to the value of your purchase contract – effectively adjusting your lending value. Your down payment will be adjusted based on this new value. For example: You currently have an offer on a home for a purchase price of $500,000.  Your current down payment assuming 5% down will be $25,000.  Now, you decide to add approximately $50,000 (10% of the total purchase price) in home improvements. This effectively brings your new lending value to $550,000 with a new down payment of $30,000.  NOTE: any offer over $500,000 will require a down payment of 5% up to $500k and 10% on the balance.

#2. This part is EXTREMELY important: the lender and default insurer (CMHC) will demand that the work being proposed is the work that must be done. You cannot deviate from the proposed improvements. For Example: If you state you are upgrading your heating & cooling system but opt to do a bathroom reno instead then the lender will not advance the funds as originally approved in your application. Why is this so important? Simple, the lender/insurer approved the file based on specific conditions.  conditions that were supported by an inspection/appraisal to determine value. If you choose to do something different then this could undermine your application putting undue stress on your family.

#3. Appraisal Report before completion. As mentioned in #1, an appraisal is required to determine the “As is” value and the “as is complete” value. What does “as is” mean? The “as is” value is the value before any work is done. The appraiser needs to evaluate the home’s market value before any work is done.  Should the value come in lower than the offer then this could undermine your application. In most cases, the insurer will request this but there are the odd cases where the lender doesn’t require an appraisal upfront.  Additionally, the “as is complete” value represents the assumed lending or market value of the home when the reno project is complete. It would be assumed that every dollar spent would equate to a dollar gain in market/lending value but this is not always the case. This is why the insurer/lender will request this as it is their responsibility to ensure that the value is fully supported.

#4. Final Inspection Report when your project is done: This is the final step in what surely seems like a complicated application process. In all cases, a final inspection report is required by the original appraisal firm to validate the project completion (based on the quotes provided). This is the only way for a lender to ensure the investment/renovation cost is added to the overall value of the home.  If you remember from #2, the money cannot be released until the project is complete. The lender needs to confirm the work was done and the money invested into the property before they will release any funding.  So if you made the mistake of doing something different than quoted then the lender/insurer may withhold the funds entirely.

The criteria above may sound scary but understanding how the program works will prevent these unfortunate missteps from occurring. A purchase plus improvement loan has helped many clients find their perfect home – especially during a time of high market values.

Before you dismiss “that” home as a lost cause, consider the possibilities. With a PPI loan, you have the power to turn a dated dwelling into your dream home – one avocado-free kitchen, pink-free bathroom, and shag-free floor at a time. Embrace the possibilities, unleash your creativity, and get ready to fall in love with your own home.

Remember, the journey from “that” home to your dream home may not always be smooth sailing, but with a little humor and a lot of imagination, anything’s possible. So go ahead, make an offer, and get ready to transform “that” home into the stylish sanctuary you’ve always dreamed of.

Kari Gares

Mortgage Broker