Purchase Plus Improvements: Buy a Fixer-Upper and Finance the Renos

You've found the perfect location — the right neighbourhood, the right lot, the right school zone. The only problem is the kitchen is straight out of 1987, the carpets need to go, and the bathroom makes you wince. Sound familiar? This is actually a great situation to be in, because there's a mortgage product made exactly for it. It's called Purchase Plus Improvements, and it lets you finance the cost of renovations into your mortgage at the time of purchase. Let me walk you through how it works and whether it's the right move for you.

What Is Purchase Plus Improvements?

Purchase Plus Improvements (also called PPI) is a mortgage product that allows you to include the estimated cost of home improvements in your mortgage — above and beyond the purchase price of the home. Instead of buying a home, draining your savings on renos, and then hoping to refinance later, you get all the financing sorted out at the beginning, in one clean package.

Here's the basic structure: you buy the home, then the lender adds the approved renovation cost to your mortgage. You pay for the renovations as they're completed, and a lender-appointed inspector verifies the work was done. Once the inspector signs off, the renovation portion of the funds is released directly to you (or to your contractor). The completion window varies by lender — typically 90 to 180 days after closing. Always confirm the deadline with your specific lender before you start planning contractor timelines.

The biggest appeal: you can potentially get a mortgage for $550,000 on a home that sold for $480,000, because the lender is recognizing the $70,000 in renovations as adding equivalent value to the property.

What Renovations Qualify?

Not every renovation qualifies for a PPI mortgage, and this is where a lot of buyers get tripped up. The lender's core requirement is that the renovations must add value to the property, be permanent, and be completed within a reasonable time frame after closing — typically between 90 and 180 days depending on the lender.

Renovations that typically qualify: kitchen and bathroom upgrades, flooring replacement, window and door replacements, roofing, electrical panel upgrades, plumbing updates, insulation and HVAC improvements, basement finishing, and garage additions.

Things that generally don't qualify: furniture, appliances (in most cases), cosmetic items like paint that don't require professional installation, landscaping, hot tubs and pools, and temporary or removable fixtures.

The key test is whether the renovation is something a future buyer would consider part of the "real property" — permanently attached, structural, and value-adding.

How Much Can You Finance for Renovations?

The renovation amount is typically capped at the lesser of $40,000 or 20% of the purchase price on standard programs. However, some lenders will go up to $100,000 in renovation financing — this isn't limited to conventional mortgages only; certain lenders offer higher caps depending on the property, the improvements planned, and your overall file. So if you're buying a $400,000 home and need $80,000 in renovations, it may be possible — the right lender makes a big difference here. This is where working with a broker who knows which lenders are flexible really pays off.

How the Approval Process Works

Here's how a PPI mortgage works step by step. First, you make your offer on the home, conditional on financing. As part of that financing application, you provide lender quotes from licensed contractors for the planned renovations. These quotes need to be fairly detailed — not just "kitchen renovation, $45,000," but a breakdown of the work to be done.

The lender then orders an appraisal — but not just on the home as it stands today. They order an "as-improved" appraisal, which estimates the property value after the renovations are complete. This is the critical number: the mortgage is based on the lesser of the purchase price plus renovation costs, or the as-improved appraised value.

Once everything is approved, you close on the property at the base purchase price. The renovation funds sit in a holdback — meaning the lender holds them and releases them in stages as work is completed and verified by an inspector.

The Down Payment Consideration

Your down payment on a PPI mortgage is calculated on the total purchase price plus renovations — not just the purchase price alone. So if you're buying a $480,000 home and adding $70,000 in renovations, the total is $550,000, and your 5% minimum down payment would be calculated on $550,000.

This is important to understand upfront. Some buyers assume they only need 5% of the purchase price and are surprised to learn the calculation works on the full amount including renos. It's not a huge difference in most cases, but it's worth factoring into your planning.

Managing the Renovation Process

Here's where things can get stressful if you're not prepared. The renovation holdback means you're living in a home under construction (or paying rent somewhere else while the work is done) and waiting for the lender to release funds before you pay your contractor in full. Most contractors will require a deposit, and you'll need to bridge that from your own pocket until the holdback is released.

A few things that make this go smoothly: hire licensed, reputable contractors who are experienced with lender holdback processes. Get your contractor quotes lined up before you make your offer, not after. Set a realistic timeline — most lenders give you 90 to 180 days from closing to complete the renovations, but confirm this with your lender before you start booking contractors. Ninety days can feel very short for a large kitchen or bathroom gut. The sooner you lock in your contractor, the better.

Also, go back to the lender if the renovation scope or cost changes. If you discover additional issues once the walls are open (which happens constantly in older homes), there are provisions to modify the renovation budget — but it requires lender approval and may need a new appraisal.

Is Purchase Plus Improvements Right for You?

PPI is a fantastic tool when used correctly. The best candidates for a PPI mortgage are buyers who:

Have found a great property at a price below market that needs cosmetic or structural upgrades. Don't have substantial cash reserves to fund renovations after closing. Are buying in a neighbourhood where reno'd homes sell for significantly more — meaning the as-improved value will support the larger mortgage. Have a clear renovation plan and access to reputable contractors.

It's not ideal for buyers who want open-ended renovation flexibility (you're locked into the approved scope), or for properties where the renovation ROI is unclear.

Let's Find You a Fixer-Upper Worth Financing

I've helped a lot of clients use the Purchase Plus Improvements program to turn dated properties into their dream homes — all while keeping their down payment manageable and their cash reserves intact. If you're looking at fixer-uppers and wondering whether the numbers can work, let's sit down and go through it.

Book a free consultation or call me at (403) 404-0048. I love this kind of creative problem-solving, and there's real satisfaction in helping someone see the potential in a property that others have overlooked.