Mortgage Blog

Purchase Plus Improvements

November 13, 2025 | Posted by: Patricia McKean - Cochrane and Airdrie Mortgage Broker

Turn a house with potential into your perfect home

In many markets, finding a home that checks all the boxes is getting harder. But what if you found one that needs a little work, and used that renovation opportunity to your advantage? A Purchase Plus Improvements mortgage gives you that flexibility.

What is a Purchase Plus Improvements mortgage?

This mortgage lets you incorporate the cost of planned renovations directly into your purchase price, so you buy the home and finance the upgrades all in one simple transaction.

• You will apply for the purchase of the home plus the cost of improvements.
• The renovations must add value to the home (not cosmetic only) and typically have a cap (for example, up to $40,000 to $100,000 of improvements).
• You make one mortgage payment, no separate renovation loan required.

How does it work in real life?

Here is a step by step look:

• You are shopping for a home and spot one with great bones, but you would like to update the kitchen, add a deck, or convert part of it into a secondary suite.
• Bring a contractor along (or have them inspect the property) and get a quote for the needed work.
• You make your offer on the home. In your mortgage application, include the contract or quote for the renovation work.
• Suppose the purchase price is $600,000, and renovations are quoted at $35,000. Your mortgage will be based on $635,000. Using a 5 percent down payment example: your down payment is 5 percent of $635,000.
• On possession, the lawyer advances funds for the purchase portion. Then you have a set period (often 90 days) to complete the renovations.
• Once the work is done and verified by the lender or inspector, the renovation portion of your mortgage funds are released.

What types of properties qualify?

Typical eligibility criteria include:

• The home must be a maximum of four units and you must occupy one unit as your principal residence.
• It could be a newly built home, or an existing home that needs upgrades.

How you could use it for a secondary suite

If you are planning to add a legal or rental friendly secondary suite, this structure can be especially helpful. The potential rental income before renovations might even be used when qualifying.

That means you could stretch your budget a little further because the future rental income is factored in early.

When are the renovation funds released?

The renovation portion is typically held back until the work is completed. You will want a plan in place (savings, line of credit, etc.) to cover contractors or materials upfront.

In some cases the lender may release partial funds at milestones (for example: after garage work is completed, then windows or hot water tank later).

Work usually needs to be finished within about 90 days of closing.

Doing the work yourself?

Yes, but there are some extra rules:

• If you are the one doing the labour, the lender will only cover the materials cost.
• You will need to keep all receipts and proof of payment.

What if you decide not to do the upgrades?

If the renovation work does not happen after closing:

• The funds set aside for improvements simply go toward your mortgage principal.
• Your mortgage payment remains the same as what you agreed to.

Steps to get one of these mortgages

Here is the simplified path:

• Step 1: Get a pre approval so you know your budget.
• Step 2: Shop for a home and decide what upgrades you would like to make, get quotes from contractors.
• Step 3: Your broker secures approval based on the home’s current condition and the reno cost.
• Step 4: You refinance or finalize the mortgage including the renovation cost.
• Step 5: Close on the home, begin the approved renovations.
• Step 6: After work is done, an inspector verifies completion.
• Step 7: Funds are released to pay contractors.
• Step 8: Enjoy your upgraded home.

Why this might be a smart move

• It gives you more flexibility when you find a home that is almost perfect but needs work.
• You avoid having to take out a separate renovation loan or line of credit.
• You potentially increase your property’s value from day one.
• You may qualify for a higher purchase price if you are adding rental income (for example, via a suite).

A few things to keep in mind

• Make sure renovation quotes are detailed and realistic.
• Make sure the contractor is licensed, and check timelines.
• Understand that until the work is done and verified, the renovation funds are held back.
• Know that if you do not do the work, your mortgage still goes ahead, you just skip the improvements.
• Be sure to manage cash flow for the interim period (before the renovation funds are released).

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