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How the CMHC Improvements Mortgage can Help You

25 October 2013

Have you been putting off buying a home because it needs too many home renovations and you don’t want to put extra money in after already paying the purchase price? If that’s the case, then CMHC – yes, the same organization that will insure your mortgage if you don’t have the 20 per cent down payment – might be able to help you. And they’ll be able to do so through a program called the CMHC Improvements Mortgage.

The CMHC Improvements Mortgage will provide you with 10 per cent of the home’s value, after that value has been increased by the home renovations. So if you’re buying a home that’s worth $350,000 and the renovations you’re making will increase that value by $50,000, the CMHC Improvements Mortgage will provide you with 10 per cent of the end value, the $400,000.

To qualify for the program you must provide a quote from the contractor before the sale on the home closes, and that quote must be submitted to both the lender and CMHC for approval. There must also be a home inspection condition contained within the Offer to Purchase. Once the quote has been submitted by both parties, the total amount approved for will be added to the total mortgage amount.

On the day the sale closes, the improvement amount will be advanced to the lawyer, who will keep it in escrow until the improvements are made. That does mean that you’ll have to foot the bill at the time of the renos, and that you’ll get it back once everything is done. After the renovation the lender will send an appraiser to your home and confirm that the work outlined in the initial quote was completed. They can then tell the lender, who will authorize the lawyer to provide you with the total renovation amount.

You must be warned that this program does not include everything you might need to purchase for the home. Appliances, for instance, are not included as they can be removed from the home when you leave, and many purchasers need to buy these anyway. Even furnaces aren’t included as these should be in good working condition when you buy the home. Also adding income properties such as basement apartments or an addition are also not eligible for the home.

With this program, it opens  up the door for buyers who are having trouble coming up with their down payment, and can’t afford to pay for home renos along with it. Just be sure that before you put in an offer to buy that home, you’ll be eligible for this rebate so that you don’t end up with a home and renovations that you can’t afford.

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