Purchase Plus Improvements Mortgage

[Itsik]

Hi all,



I'm looking for a mortgage broker who understands the ins and outs of the purchase plus improvements mortgages.

I'm looking at financing more than the traditional 10%.

If you can refer someone you know, please do not hesitate.

Thank you,

Itsik

 

[KULA]

Hi Itsik,



We have done a number of mortage + improvements. We have used Jas Grewal 416-410-9905 who has been excellent!

Keep in mind that with such a structure, what you tell the lender you are going to do, you do. You should have some extra funds for stuff that shows up when renovating that you did not plan to do.



Message me if you want some more help.



Niran

 

[DaveL]

Hi Itsik,



I would talk to Peggy Wong and Peter Kinch's office. I have done 3 of these with her in the last year. My experience has been that MCAP will give the most money which is 25K most other lenders will give up to 20k. Her number is 604-939-8326 ext. 39 or email is [email protected]. She can lend across Canada.



Good Luck!

 

[Nir]

Is this 20K or 25K simply added to the mortgage loan/principle amount with same condition (interest and amortization)? OR does the mortgage plus improvement proogram usually include 2 separate loans - mortgage and improvement with different amortization and interest? Thanks & Regards, Nir

 

[DaveL]

Hey Nir,

It's added to the mortgage. For example, house purchase is 325k + 25k (plus improvement) the bank will do the mortgage for 350k and have lawyer hold 25k back until a final appraisal is done to confirm the work. I once did a purchase plus improvements and only needed 15k and lender gave it to me all up for some reason.

Hope this helps

 

[Thomas Beyer]

You submit an appraisal with as-is and future after repair value, plus a list of items that you will do with cost estimates & timeline. Then lender will give you the mortgage and will hold back the estimated or sometimes up to 2x the estimated amount. Once done, an independent third party will verify work is actually done and bank will release $s.



You hustle as you pay interest on the withheld money.



We have done it a few times.



Another version of this is the "rental achievement" mortgage were the holdback is not based on work $s but on achieved rents, say in a year ( more common in multi-family than singles).

 

[Aneta]

To add to the topic: sometimes lender will want an appraisal after work is done to verify the value of the property and they will then lend (release the holdback) on the lesser of the new appraised value or the cost of work done. Other times they will just send an appraiser to verify the work on your list was done, or, if the cost of work is below a certain $ threshold, they will simply review receipts paid to the contractors. So, before getting into the PPI mortgage, definitely find out what the requirements are, especially if you can't absorb the potential shortfall in scenario A.



Keep your contractor quotes that you submit to mortgage broker and lender clear, reasonably priced and easy to understand, otherwise you open it up for lender to get picky and choosy with the items.



PPI is an amazing strategy, have used it multiple times personally, and always put it on the table as an option for my investor clients.

 

[Nir]

Thank you Dave, Thomas and Aneta for the great input and quick response!
Sincerely, Nir

 

[TonyMandrique]

[quote user=Aneta]PPI is an amazing strategy, have used it multiple times personally, and always put it on the table as an option for my investor clients.



Thanks for sharing Aneta.



Knowing the investor's plan of action, I wonder why other mortgage brokers do not bring this up to the table not until you ask for it, not to mention the lender's readvanceable program. Is it more tedious to process mortgage application and get approval when asking for PPI and enroll in readvanceable program available from lenders?



Just curious. Thanks again.

 

[Thomas Beyer]

[quote user=Aneta]PPI is an amazing strategy,


Indeed .. it is probably THE best wealth improvement tool. Buy and hold is steady, steady, slow. This is wealth creation on steroids; more work but much faster.



I.e. buy ugly, fix it up, re-fi and rent or sell. Repeat.



Ensure you have enough cash for cost overruns and interest (+utility+insurance+property tax) payments !