Purchase Plus Improvements

Tracy Head • March 19, 2026

Hammer, Nails… and a Mortgage That Sees Potential

Over the years I’ve noticed a pattern: buyers fall into two camps. The “this house is perfect” crowd… and the “this could be perfect if we just fix a few things” crowd.


Today, we’re talking about the second group—and one of the most underused tools in the Canadian mortgage world: the purchase plus improvements mortgage.


What Is It (and Why Should You Care)?

A purchase plus improvements mortgage lets you roll renovation costs into your mortgage at the time of purchase. Instead of draining your savings—or worse, putting renovations on a high-interest line of credit—you finance those upgrades at your mortgage rate.


In plain English: you buy the house and fix it up, all in one tidy package.

You get to enjoy the renovations while you live in your home, rather than scrambling to renovate or update when you are getting ready to sell.


Lenders like this because you're increasing the value of the home. You should like it because you're borrowing at (usually) the cheapest rate you'll ever get.


Let’s say you’ve found a home priced at $700,000. It’s solid—but a little tired. You want to:

  • Upgrade a dated bathroom
  • Replace an aging furnace
  • Put on a new roof

Total improvement budget: $40,000


With a purchase plus improvements mortgage, your financing is based on the “as-improved” value, meaning:

  • Purchase price: $700,000
  • Improvements: $40,000
  • Total financed value: $740,000


Because the purchase price exceeds $500,000, the minimum down payment in Canada is not 5% flat.


It’s calculated as:

  • 5% on the first $500,000 = $25,000
  • 10% on the remaining $240,000 = $20,000

Minimum required down payment: $49,000


Mortgage Before Insurance

  • Total value: $740,000
  • Down payment: $49,000
  • Base mortgage: $691,000


Adding the CMHC Insurance Premium


Because your down payment is under 20%, mortgage default insurance applies.


At this loan-to-value (roughly 93.4%), the CMHC premium is 4%.

  • CMHC premium:
    $691,000 × 4% ≈ $27,640


This premium is typically added to the mortgage, not paid upfront.


Total mortgage after insurance: ≈ $712,421


What Does That Payment Look Like?


Now let’s plug that into real numbers:

  • Mortgage: $712,421
  • Rate: 3.99%
  • Amortization: 25 years

Estimated monthly payment: ≈ $3,750–$3,760/month (call it $3,755/month for coffee-shop accuracy).


Why This Still Makes Sense

Here’s where people sometimes hesitate:
“Wait—I’m paying insurance and financing renovations?”


Yes. And in most cases, it still works in your favour.


Because:

  • You’re financing renovations at 3.99%, not 8–10%+
  • You’re improving the home’s value immediately
  • You’re avoiding the markup baked into fully renovated homes


In other words, you’re not just spending money—you’re strategically improving the value of your new home.


How It Actually Works Behind the Scenes


Here’s the part most buyers don’t realize:

  1. You submit quotes for the renovations upfront
  2. The lender approves the total (purchase + improvements)
  3. The purchase closes as usual
  4. The renovation funds are held back by your lawyer
  5. You complete the work
  6. Funds are released once the work is verified


It’s a bit of paperwork—but compared to juggling contractors and separate financing? It’s a win.


Why I Recommend This More Often Than You’d Think


After years in this business, I can tell you this - the “perfect home” usually comes with a premium price tag.


But the “almost perfect” home? That’s where the opportunity is.


With a purchase plus improvements mortgage, you can sometimes:

  • Buy in a better neighborhood
  • Customize the home to your taste
  • Avoid bidding wars on fully renovated properties
  • Finance upgrades at mortgage rates (instead of 8–10%+ elsewhere)


If you’re considering this route, here’s my advice:

  • Get detailed quotes (not ballpark guesses)
  • Plan for a buffer—renovations love surprises
  • Work with a broker early (this is not a last-minute add-on)


And most importantly: don’t be scared of a home that needs work. Some of the best purchases I’ve seen over the years started with the phrase, “Well… it’s not perfect, but…”


Final Thought

A purchase plus improvements mortgage isn’t just financing—it’s strategy.

It’s the difference between settling for someone else’s vision… and building your own, from day one.


And in a market like Canada’s, that kind of flexibility isn’t just nice to have—it’s powerful.

Tracy Head

Mortgage Broker

GET STARTED
Family playing with colorful blocks on the floor in a cozy living room

The Road to Mortgage Freedom: How You Can Pay Off Your Mortgage Sooner

By Tracy Head • August 21, 2026
After years in the mortgage business, one of the questions I hear most often from homeowners is, “How can I get this mortgage paid off sooner?” It’s a good question. A mortgage may be considered “good debt” because it helps us buy a home, but that doesn’t mean anyone wants to be making mortgage payments for the full 25 or 30 years if they can avoid it. The good news is that most Canadian mortgages give homeowners several ways to accelerate their payments and reduce the amount of interest they pay over the life of the mortgage. The key is understanding how your mortgage works and making use of the prepayment privileges that are already built into your contract. Start by understanding amortization First, it’s important to distinguish between your mortgage term and your amortization. Your term is the length of time your current mortgage agreement and interest rate are in place. Five years is a common mortgage term. Your amortization is the total length of time it would take to pay off the mortgage if you simply made the required payments and did nothing extra. A 25-year amortization is very common. You don't have to wait 25 years to become mortgage-free. There are several strategies that can shorten that timeline considerably. Increase your regular payments The simplest strategy is often the one that gets overlooked: increase your regular payment. If your mortgage payment is $2,500 and you increase it to $2,750, that additional $250 is going toward your mortgage balance. As the principal comes down, you pay less interest over time. Most Canadian banks offer some form of annual payment increase privilege on closed mortgages. A common privilege is the ability to increase your regular payment by 10 per cent, although some lenders offer more. That means a homeowner doesn't necessarily have to wait for a large windfall to make a difference. Increasing the payment by a manageable amount can gradually have a significant impact. Make a lump-sum payment Another popular option is a lump-sum prepayment. Perhaps you receive a work bonus, a tax refund, an inheritance or proceeds from the sale of an investment. Instead of spending all of it, you can put some of that money directly against your mortgage principal. Many Canadian lenders allow homeowners to make an annual lump-sum payment without a penalty. A common privilege is 10 per cent of the original mortgage amount, although some lenders allow 15, 20 or even more. For example, on a $500,000 mortgage, a 10 per cent annual prepayment privilege could allow you to put $50,000 directly against the mortgage without a prepayment penalty. That's a pretty powerful tool. Of course, every mortgage contract is different, so it's important to check the exact privilege before making a large payment. Take advantage of payment frequency This brings us to one of the most common questions I get: What's the difference between bi-weekly and accelerated bi-weekly payments? The difference is bigger than many people realize. Let's use a $500,000 mortgage at 3.99 per cent with a 25-year amortization as an example. The monthly payment would be approximately $2,630. A regular bi-weekly payment takes that monthly payment, multiplies it by 12 and divides it by 26. That works out to approximately $1,214 every two weeks. Because there are 26 bi-weekly payments in a year, you're essentially making the equivalent of 12 monthly payments over the course of the year. Now let's look at accelerated bi-weekly payments. Instead of taking the monthly payment and converting it to a bi-weekly payment, the lender simply divides the monthly payment in half. $2,630 divided by two gives us an accelerated bi-weekly payment of approximately $1,315. Here's where the difference becomes important. You're making 26 payments of $1,315, which works out to approximately $34,190 per year. With regular bi-weekly payments, you're making 26 payments of approximately $1,214, or about $31,564 per year. That's a difference of roughly $2,630 a year — essentially one extra monthly mortgage payment. And that extra payment goes directly toward getting the mortgage paid down faster. The numbers at a glance
House in foreground with a large wildfire and thick smoke burning on the hillside behind it

When Wildfires Interrupt Your Home Purchase: What Every Buyer Needs to Know

By Tracy Head • August 10, 2026
For many Canadians, buying a home is one of life's most exciting milestones. You've found the perfect property, negotiated an accepted offer, arranged financing, and started picturing where the furniture will go. Then, almost overnight, Mother Nature throws a curveball. A wildfire starts nearby. As someone who has spent many years helping Canadians navigate home financing, I've seen firsthand how quickly a wildfire can change what seemed like a straightforward transaction. The good news is that many purchases still close successfully—but it's important to understand how these situations can affect everyone involved. One of the most important concepts in a real estate contract is something called force majeure . While the exact wording varies depending on the contract, a force majeure clause generally recognizes that extraordinary events beyond anyone's control—such as natural disasters—may temporarily prevent one or more parties from fulfilling their contractual obligations. If evacuation orders are issued, government offices close, roads become inaccessible, or lawyers, lenders, appraisers, or buyers simply cannot complete the necessary steps to transfer ownership, a force majeure clause may allow the closing date to be postponed until those circumstances have passed. It doesn't automatically cancel the sale, but it can provide valuable flexibility during an unpredictable situation. This is one of the reasons it's so important to stay in close communication with your mortgage broker, REALTOR®, lawyer, and lender. Everyone needs to understand what's happening so adjustments can be made if necessary. One issue that catches many buyers by surprise is home insurance. Most lenders require proof of insurance before they will release mortgage funds. During wildfire season, insurance companies sometimes place temporary restrictions or even stop issuing new policies altogether for homes located in high-risk areas. If you've waited until the last few days before possession to arrange your insurance, you could suddenly discover that coverage isn't immediately available. Without insurance, your lender may be unable to advance your mortgage funds, potentially delaying your closing. My advice is simple: purchase your home insurance as early as your insurer will allow. Having coverage arranged well in advance greatly reduces the chance of running into last-minute surprises if wildfire conditions change. It's one of those tasks that's easy to move to the bottom of the list until it suddenly becomes the most important item on it. Wildfires can also create a ripple effect that extends well beyond the property you're purchasing. Imagine you're buying a home in one community because your current home has sold and is scheduled to close first. Everything is carefully timed. Then a wildfire threatens your existing neighbourhood. Perhaps your buyers are unable to obtain insurance. Maybe their lender won't fund the mortgage until conditions improve. Or perhaps the buyers simply cannot complete the purchase because of evacuation orders. If the sale of your current home is delayed, you may no longer have the funds available to complete the purchase of your next home. That can create a chain reaction affecting multiple transactions, sometimes involving several families. These situations are stressful, but they also highlight why real estate professionals, lenders, and lawyers work so hard together when unexpected events occur. Everyone's goal is usually the same - to find a practical solution that allows the transaction to move forward once circumstances permit. If you're buying or selling during wildfire season, don't be afraid to ask questions. Understand how your contract addresses unforeseen events. Arrange your insurance early. Keep your financing documents up to date. Most importantly, stay in regular contact with your mortgage broker and the rest of your professional team. Wildfires are unpredictable. Preparation isn't. While none of us can control the weather, we can control how prepared we are when unexpected challenges arise. A little planning today may make all the difference tomorrow, helping ensure that when the smoke clears, you're still on track to receive the keys to your new home.