Product requires work but is worth it, say brokers

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Purchase plus improvement mortgages are becoming more popular among brokers and although they may require a good deal of work, industry professionals share their tips on getting the deal done.

“I’ve done two or three purchase plus improvement mortgages recently and you just have to follow the guidelines and get all your documents in order,” David Benson of Mortgage Intelligence told MortgageBrokerNews.ca. “The problem with the program is that it’s a very precise program; people have to pay up front before working it into the mortgage.”

Problems may arise when clients are unable to foot the bill, themselves, but Benson says some contractors are willing to accept deferred payment if the work is relatively modest. The biggest issue is clients who want to do the work on their own.

“A lender is more reluctant to lend when the buyer wants to do the work himself,” Benson said. “It’s a program that can work but there’s a lot of work involved.”

Craig Spicer of Verico Premier Mortgage Centre is another broker who sees the advantage of these types of products for clients, especially first-time buyers.

“Nowadays with the 80 per cent (loan to value) rule you’re hard pressed to get enough funds to do a renovation at refinance time, especially with the growth factor of housing prices,” Spicer said. “If you do it at purchase you can incorporate it into the mortgage.

“There are a few lenders who are willing to do it.”
 
 
 
  • Deborah on 2014-06-26 12:34:34 PM

    I think its a great product, and a good idea to do it at the time of purchase, because it is highly unlikely a client will be able to do a refinance to include money for improvements down the road. I agree with the issue of lack of funds up front too. Many buyers barely made the down, and certainly may not have remo funds in advance. Another issue I was confronted with is from the time the offer is written, you have to get in, get the measurements and then go get quotes...this in itself took a full week and then submitting the deal, which is a bit more complex than just a straight up deal (especially with underwriters being so busy right now) we had to extend the subjects until approval was obtained, and in a fast market, you could lose your offer if sellers don't want to extend. My advice is, if you decide you are doing a purchase plus, ask for 2 weeks minimum for subjects, and if you can get longer go for it. Remember if you have approval really quick you can always remove the subjects earlier, but you may not be able to extend if you need to. A lot of work for all involved to lose your offer in the last couple of days because you ran out of time.

  • Gale Tracey AMP, Mortgage Architects on 2014-06-27 12:39:11 PM

    I am marketing this service to my realtors and buyers through the Canadian Home Renovation Plan, the brain child of Greg Williamson of 180 Degrees Mortgage Professional Academy. You must educate your realtor and buyer in advance that you are going to need additional time for subject removal to allow for the estimates for the upgrades you want to include in the mortgage and the lender appraisal. This can be easily attained by going to Home Depot to get most estimates to expedite the process. Realtors can also benefit by marketing their listings with this program as most buyers always find something about a property they want to change and may not know they can include it in their mortgage whether they are High Ratio or on the borderline of 80% LTV. We have several lenders that will provide this service on high ratio and conventional.Your Buyers and Realtors will love you for this. Buyers will have the home of their dreams in a few months by doing the renovations ASAP and the Realtors will sell their properties faster! It is a Win Win!

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