Buying a home that needs work is a common Canadian homebuying scenario — especially in markets where move-in-ready homes are priced at a significant premium. The Purchase Plus Improvements (PPI) mortgage program lets you finance eligible renovation costs directly into your purchase mortgage, giving you access to mortgage-rate financing for renovations from day one rather than scrambling for higher-rate consumer financing after closing.
What Is a Purchase Plus Improvements Mortgage?
A Purchase Plus Improvements mortgage rolls the cost of planned renovations into your purchase price and mortgage amount. Instead of buying a home for $600,000 and then separately financing $40,000 in renovations at higher consumer rates, you finance the full $640,000 at your mortgage rate from a single lender.
The lender advances the renovation funds after the work is completed and verified — typically by a lender-ordered appraisal confirming the improvements were done.
How Purchase Plus Improvements Works
Example: How the Numbers Work
Without PPI:
— Purchase mortgage: $650,000 (with 10% down = $585,000 mortgage)
— Renovation financing: $50,000 renovation loan at 9% = $710/month for 7 years
With PPI:
— Purchase price + improvements: $700,000 (with 10% down = $630,000 mortgage)
— Renovation financing: rolled into mortgage at 4.5% over 25 years
— Monthly cost of the extra $50,000: ~$275/month — saving ~$435/month vs. the renovation loan
Total interest saved: $20,000+ over the life of the mortgage
Eligible Improvements
Not all renovation work qualifies. Eligible improvements must:
- Be permanent improvements that add value to the home
- Be completed by licensed contractors (not DIY)
- Be supported by written quotes at application time
Typically Eligible
- Kitchen renovation
- Bathroom renovation
- Basement finishing
- Roof replacement
- HVAC system replacement
- Flooring replacement
- Window and door replacement
- Electrical or plumbing upgrades
- Garage construction or conversion
Typically Not Eligible
- Furniture, appliances (not built-in)
- Landscaping and pools
- Cosmetic/non-permanent items
- DIY labour costs
Lender and CMHC / Sagen Requirements
| Factor | Typical Requirement |
|---|---|
| Maximum improvement amount | 10% of purchase price (some lenders allow up to $40,000 or more) |
| Down payment basis | Based on "as-improved" value (purchase price + improvements) |
| Minimum down payment | 5% of first $500K, 10% of next $500K (standard insured rules) |
| Contractor requirements | Licensed and insured contractors; written quotes required |
| Completion timeline | 90–180 days from closing (varies by lender) |
| Holdback release | After lender inspection confirms completion |
CMHC insured mortgages: If your down payment is less than 20%, your mortgage is CMHC insured. CMHC allows Purchase Plus Improvements on insured mortgages — the improvement amount is included in the insured mortgage and the CMHC premium applies to the full amount (purchase + improvements). The premium is a small cost relative to the interest savings on renovation financing.
Who Should Consider PPI?
- Buyers purchasing a fixer-upper that needs work to be livable
- Buyers in competitive markets who want to target homes needing work (often less competition and better value)
- First-time buyers who won't have cash or equity available post-closing for renovations
- Anyone financing $20,000+ in renovations — the interest savings over a renovation loan are substantial
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What if renovation costs come in higher than the quoted amount?
The lender advances only the amount approved at application based on contractor quotes. If actual costs exceed the approved amount, you must cover the difference out of pocket or with separate financing. Get accurate quotes — and include a contingency buffer in your budget when planning the project scope.
Can I use Purchase Plus Improvements with any lender?
Most major banks and credit unions offer PPI programs, but the specific rules (maximum improvement amount, timelines, eligible work) vary by lender. Work with a mortgage broker who can compare PPI programs across multiple lenders to find the best fit for your renovation scope.
What if the renovations aren't done on time?
Failing to complete renovations within the lender's required timeframe can result in the lender demanding repayment of the holdback or converting the arrangement. Communicate proactively with your lender if delays arise — most are willing to extend timelines with proper documentation.